EC wins Open Skies case

[newswatcher]

Aviation agreements should be negotiated together, not by separate countries.

See story on BBC(05/11):

http://news.bbc.co.uk/1/hi/business/2403641.stm

[dusk2dawn]

Nº_89/2002 : 5 November 2002
Judgments of the Court of Justice in Cases C-466/98 and others
Commission / United Kingdom and others
Freedom to provide services
THE COURT OF JUSTICE EXPLAINS, BY THESE JUDGMENTS, THE DISTRIBUTION OF COMPETENCE AS REGARDS THE CONCLUSION OF INTERNATIONAL AIR TRANSPORT AGREEMENTS

Link to court press release in english (http://www.curia.eu.int/en/cp/aff/cp0289en.htm).

[Squawk7777]

There's more here in the Financial Times (http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1035873005619&p=1012571727088)

and for those who read German Financial Times Deutschland (http://www.ftd.de/ub/di/1036349132842.html?nv=hptn)

7 7 7 7

[Ex Servant]

Another thing we're not allowed to decide for ourselves. What's going to happen when other countries join the EU? Are our existing national carriers going to have to give up routes to allow new entrants to have a slice of the cake? EU grants to help them modernise and compete whilst we can't give any assistance to our own? How long before we see a former eastern european airline flying around with a "project sponsored by the European Social Fund" logo on the side?

[akerosid]

One place where this ruling will get a welcome is Ireland, where it should be one of the final nails in the coffin of the Shannon stopover policy. Expect the Irish govt to fight to protect this anti- competitive policy, but with any foresight (not to be expected) they will accept the inevitability. Reality, of course, suggests, that they'll put up a fight, just to show the Shannon-siders they're fighting their (but no one else's) corner.

One has to feel sympathy for EI; it could go from one extreme where it's transatlantic aspirations are undermined by the Irish govt policy of discouraging growth in t/a routes, to a situation of complete open skies, with the likes of VS, BD, AF or anyone else who wants to, flying n/s from Dublin.

[I. M. Esperto]

http://www.iht.com/cgi-bin/generic.cgi?template=articleprint.tmplh&ArticleId=76001


Copyright © 2002 The International Herald Tribune | www.iht.com

EU court strikes down aviation accords with U.S.
Barry James International Herald Tribune
November 06, 2002

Open-skies pacts stifle competition, it says

PARIS The European Court of Justice on Tuesday ruled against ‘‘open skies’’ aviation agreements between individual European countries and the United States, possibly opening the way to increased competition and greater customer choice in trans-Atlantic air travel. The court said the agreements discriminated in favor of European national airlines by giving them preference over rival European Union carriers in operating routes to the United States. The agreements are now ‘‘null and void,’’ said the European commissioner for transport and energy, Loyola de Palacio, who wants to replace them with an overall treaty negotiated by the European Commission. ‘‘This is an historic event’’ that would eventually lead to consolidation and greater efficiency of the European airline system, she said. However, a State Department official in Washington disagreed, saying that ‘‘the current agreements remain in force.’’ He said the U.S. government was carefully studying the ruling before giving its definitive opinion. Most European Union members have signed open-skies agreements, introduced by the United States in 1994, because that allows them greater access to the lucrative North American market and to build partnerships with U.S. carriers. But according to the commission, the open-skies system distorts and fragments the European single market because each country is acting only in its own interests, rather than in the best interests of the market. The commission argues that the system denies passengers the full benefits of airline deregulation in the European single market by denying airlines the destinations restricted by the open-skies agreements to national carriers. Otherwise, any airline registered in the EU is free to operate anywhere in the Union. The European Court of Justice said the open-skies agreements were illegal because they included nationality clauses on the ownership and control of airlines. For example, Air France and its alliance partners can serve a range of destinations in the United States, but other European carriers such as Lufthansa cannot operate services between France and America. U.S. airlines, on the other hand, have access to the entire EU through the web of bilateral open-skies deals. The commission argued that passengers were losing out as a result of the bilateral agreements because they are restricted to a choice between the carriers in their own country or competing U.S. airlines, unless they fly to a hub airport in another country. If passengers in France want to fly across the Atlantic with Lufthansa under existing arrangements, for example, they must first fly to Frankfurt and change planes. The commission, which has championed deregulation of the aviation market since 1992, wants the right to negotiate the kind of global agreement with the United States that would permit Lufthansa to fly to Paris, .......................................

MORE.............

[DistantRumble]

Here's the link for the
full text of the opinion and judgment from the Curia

http://curia.eu.int/jurisp/cgi-bin/form.pl?lang=en&Submit=Submit&docrequire=alldocs&numaff=C-466%2F98&datefs=&datefe=&nomusuel=&domaine=&mots=&resmax=100

for the case against the UK.

Well this'll take a while to get going

Wonder what would happen now if (for example ) EI started flying transatlantic from Heathrow.

[akerosid]

So where does this leave proposed mini deals between the US and the UK? I'm presuming it's off the agenda at the moment; are meetings between the two negotiating teams supposed to go ahead as proposed?

If BMI doesn't get the access it wants at LHR (or any), will it mean curtains for the A330 from MAN to ORD/IAD? There is already discussion of these aircraft being leased to SAA.

[GustyOrange]

WSJ is reporting today that MAN-IAD is to be dropped for the winter, with the aircraft leased to SAA.

I can't post a link as it's a subscription only site and I'm not sure if its acceptable to cut and paste the article. Sorry.

Gusty

[Iron City]

If it must be EU to US agreement, not individual countries that may make it reasonable to actually negotiate some real market access in the US. You didn't seriously think ther ewas going to be significant access into the US market for european carriers without comprable access into a (barely) comprable market. MAybe start with europe to U.S. east of mississippi----that might be comprable.


With authority to negotiate agreements like this going to the EU from the formerly soverign states and the authority for airworthiness certification going to a european agency what other authorities of soverign nations are the european states going to give up next? Maybe when it comes to voting in international aviation fora EU should get one vote, individual states should get the same vote as individual US states, i.e. France = Ohio?

[OPEN CLB]

I doubt it will really enhance competition. Until now, barely any EU airlines are using the right to fly within the entire EU. Notable exceptions are Ryanair and Easyjet, there still is no LH flight from CDG to FCO or AF flight from FRA to HAM or wherever. Only the number of codeshares has increased, but only within the alliances.

So whoever wants to flyto the US with LH from CDG will still have to go via FRA, as it simply is LHs main hub. Chances for nonstop LH or BA flights the US (or other destinations) are very very slim, as they lack connecting traffic at these airports. Also the new rules might actually lead to higher prices, as smaller airlines will now be merged into one of the large three, leading to less competition.

Also, who says other contries will accept the EU as contract party, as it doesn't possess any real souverign status? What if, Japan, China, or whoever says they won't sign a contrct with the EU, only with the individual states, as the EU is not a "country" in classic terms?

[dusk2dawn]

Iron City , as for the (barely) comprable market, also known as the EU, it constitutes about 350 milion people.

OPEN CLB if you take a closer look at the commission's press release (http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=IP/02/1609|0|RAPID&lg=EN) you will find that they are more concerned with creating market access - on equal terms. Europe have, so far, had sufficient pouch to carry that through within the member states. Remember that the basis of the EU was as a customs union - designed to keep third parties at arms lenght.

[Iron City]

You are correct, Europe is a small fraction of the U.S. market that in calendar year 2000 had 668.5Million passenger enplanements and 27.05Million aircraft operations from the 100 busiest airports alone.

This shows the lack of economic incentive for the U.S. to negotiate an open skies agreement with EU. Some kind on an open skies-ish deal with individual countries or EU as a whole maybe, but why give foreign carriers entre into a huge market in exchange for entre into a dinky one?

[On GS]

Well, the 20 busiest airports in Europe had in 2000 some 385000000 passengers (The 4 London airports accounts for 95000000):eek: , so I guess this tiny market would have no interest to US airlines, right?:rolleyes:

[akerosid]

I wonder if all of this talk about access to each other's markets is a red herring?

- Is there a major unserved route in the US that a European airline could justify establishing (given all the costs of marketing, basing aircraft and crews); likewise for a US airline in Europe?

- Short haul flights - in Europe, at any rate - will come to be dominated by low cost carriers. Southwest will ultimately be the US's largest carrier. Assuming that cabotage rights will only be available to airlines flying t/a routes, how will mainline airlines be able to compete against genuine low cost carriers? Even if it takes a few years to go down the low cost route, the investment will take a long time to recoup and it's not going to be a good one if low cost carriers move in within, say, five years.

- Most major carriers in the US are involved in alliances in some form with major European airlines. Won't better use of these alliances be a more cost effective way of getting a better foothold in new markets?

- We've all seen examples of airlines which have fallen because they went into markets they didn't need to be in. Airlines may want a better foothold in more lucrative markets, but perhaps the rights they already have will do this more effectively. The main focus of a US:EU bilateral should be flights between the two. A lot of time can be wasted negotiating rights which may never be used. The size of the markets really hasn't a lot to do with it; the competition they would face and the realities of coming face to face with low cost carriers.

[Iron City]

Good points Akerosid.

I believe it would be slightly more attractive for european carriers to try for transcontinential US flights because the equipment, etc would be the same (remember JFK to LAX is a few thousand miles) but it would be a long time to turn a profit on this, if ever, because the competition would be so stiff. Historically these flights are the best deals.

Intra european routes being relatively shorter haul are more suitable for locally based carriers. I would think beyond rights and some cream skimming would be the best a US carrier could do and few of them are in the financial or business plan position to do this or want to do this in the forseeable future. TWA had an intraeuropean service for years and I believe Pan Am did too. As I recall they did alright but did not make lots of money at it and it was a regulatory and maintenance hassle to base the aircraft and crews there.

Where things appear to be mostunderserved with reasonably priced service in the US is short haul (out to about 300 miles) to less major airports. To give an idea of the market in the US the 100th busiest airport in terms of passenger emplanements in 2000 was Harrisburg Pennsylvania with about 600,000 pax. It is a state capital but in terms of pax air transportation definately second tier at most. Fares tend to be astronomical (I can fly to London round trip less expensively than one way to Spartanburg South Carolina). If somebody can do the "second tier" service economically and offer good fares and still make a profit that is where the profitable growth is in the US market, and from a distances and passenger density point of view it looks almost european. Are there lessons to be learned here by US carriers or can divisions/subsidiaries of european carriers bring in a suitable business model?

FOR MODERATOR: The way this thread is going would it be more appropriate in Aircrew Notices?

[dusk2dawn]

European Commission requests the denunciation of the bilateral Open sky agreements.

Pressrelease (http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=IP/02/1713|0|RAPID&lg=EN)