New framework for air services in the European Union - briefing30 October 2008
by eub2 -- last modified 30 October 2008
Improved safety and price transparency: these are the key features of the new EU Regulation on the single market for air transport which enters into force on 1 November 2008. It lays down rules for the granting of licences, control of airlines and market access, thereby ensuring more competition in the air transport field and better quality for the public. The new legislation requires airlines to include all taxes and charges in their published ticket prices. This will enable passengers throughout the European Union to be better informed about prices and to compare offers. Price discrimination based on place of residence is banned.
1. How does the regulation improve consumer protection?
The new Regulation provides for non-discriminatory and transparent pricing of air services.
- It bans price discrimination on the basis of the place of residence or the nationality of the customer or the place of establishment of the travel agent. In practical terms, this means that for the same product – i.e. the same seat on the same flight booked at the same moment – there should be no price differences based on the place of residence or the nationality of the passenger. In the past, such differences have often been observed on airlines’ websites where residents of one Member State had to book on the country-specific website of the airline and where prices could be different (the place of residence of the passenger was established via the consumer’s credit card number).
- Price transparency is improved by clarifying that the final price to be understood all applicable fares, charges, taxes and fees included. It avoids that airlines mislead consumers by advertising prices exclusive of taxes, charges and fees that are only added at the moment of booking. The breakdown between air fare or rate, the taxes, the airport charges and the other charges, surcharges or fees shall also be specified. Optional price supplements shall be communicated in a clear, transparent and unambiguous way at the start of any booking process and their acceptance by the customer shall be on an "opt-in" basis.
2. What is an operating licence?
While the Air Operator Certificate (AOC) certifies the technical capacity of an undertaking to safely provide air services, the operating licence confers the right to provide commercial air services. Hence, while the AOC is basically a safety document, the operating licence is an economic document. The AOC is a prerequisite for obtaining an operating licence. An air undertaking that has been granted an operating licence by a Member State in accordance with Community law is considered as a Community air carrier and is entitled to provide air services throughout the European Union, in and between all the Member States. From now on, it will be the same Member State whose authorities grant the AOC and the operating licence.
3. In how far does the new legislation impose a more stringent control over operating licences?
The regulation does not foresee a centralised European supervision of operating licences. The Member States remain responsible for the granting of the operating licences. However, in order to avoid divergent strictness in the application of Community law with regard to operating licences, the regulation obliges Member States to suspend or revoke the operating licence of an air carrier that does not fulfil any more the requirements of the EU regulation.
Furthermore, in order to reduce the bankruptcy rates of new air carriers, the regulation foresees better financial information to be provided to the competent licensing authorities of the Member States and obliges them to regularly check that the air carriers fulfil the requirements of EU law. Thus, if an air carrier can no longer meet its actual and potential obligations for a 12 month period, the authority shall suspend or revoke the operating licence. Pending a financial reorganisation, and provided that safety is not at risk, the authority may grant a temporary licence, not exceeding 12 months.
4. Are there any restrictions between EU Member States?
The new regulation abolishes the last restrictions existing in bilateral agreements between Member States for intra-Community services. It clearly states that "Community air carriers shall be entitled to operate intra-Community air services".
5. Does the regulation change the rules with regard to the leasing of aircraft?
Thanks to the harmonisation of safety standards in the EU, the rules for the leasing of aircraft registered in the European Union can now be relaxed. In particular, Community air carriers can freely operate wet-leased (leasing with crew) aircraft registered within the Community, except where this would lead to endanger safety.
However, to take account of safety and social considerations, the regulation introduces clear and stringent rules on the leasing of aircraft registered in third countries, especially in case of wet-leasing.
6. Does the regulation change the rules with regard to public service obligations (PSO)?
The regulation recognizes the need to maintain the possibility to recourse to PSO when the economic development of a remote region or an island depends on it. The basic principles with regard to PSO are unchanged in comparison with the present legislation, but the text has been clarified and adapted in order to allow a more efficient application.
For example, the maximum concession period when the route is being restricted to one single operator (after a call for tender) has been increased from three to four years (and even five years for ultra-peripheral regions). This will allow attracting more competitors to the calls for tenders given that depreciation costs of route-specific equipment will be reduced. At the same time, the longer concession periods reduce the administrative burden on the Member States.
The regulation also foresees in the possibility of an emergency procedure to designate an alternative airline in situations of failure of the airline servicing the PSO route.
While recognizing the importance of PSO, the regulation also wants to avoid abuse of the PSO system. Therefore, it explicitly states the necessity of respecting the proportionality between the obligations imposed and the economic development goals pursued. Furthermore, in case of doubt, it confers the right to the Commission to request a detailed economic report from the Member State concerned justifying the need for the PSO.
7. How does a traffic distribution system between airports work in practice ?
A Member State may regulate the distribution of air traffic between airports provided that:
- They serve the same city or conurbation
- They are served by adequate transport infrastructure, providing to the extent possible, a direct connection making it possible to arrive at the airport within 90 minutes, including when necessary, on a cross-border basis
- They are linked to one another and to the city or conurbation they serve by frequent, reliable and efficient public transport services.
- They offer necessary services to air carriers and do not unduly prejudice their commercial opportunities
8. Does the regulation have consequences for relations with third countries?
It also recalls that, notwithstanding the provisions of bilateral agreements between Member States, Community air carriers shall be permitted to combine air services and to enter into code-share arrangements with any air carrier, including third country air carriers, on air services to, from or via any airport in their territory from or to any point in the third country.
In some cases, in particular if a third-country does not allow similar commercial opportunities to Community air carriers, a Member State concerned may impose restrictions on the code-share arrangements between Community air carriers and air carriers of the third-country concerned. Such potential restrictions cannot however restrict competition and must be non-discriminatory between Community air carriers.
Source: European Commission