EU-Canada aviation agreement - briefing

10 December 2008
by eub2 -- last modified 10 December 2008

A breakthrough in the EU-Canada negotiations on a large aviation agreement was made on 9 December. Negotiators from the EU and Canada had initialled a few days ago a comprehensive agreement on air services in line with the conclusions of the EU-Canada summit on 17 October. The agreement will be a major step in the opening of markets and investment opportunities. It both completes the transatlantic market started with the EU-US first stage aviation agreement, and goes well beyond it. The agreement will generate major benefits for both partners' consumers, airlines and broader economies.

Why such an agreement?

Europe and Canada are close international partners, with strong economic, cultural and political ties. However, arrangements for air transport do not reflect this reality, with Canada having restrictive or no agreements on aviation with the vast majority of Member States. The new Agreement transforms this important market for European and Canadian consumers and airlines. It also brings legal certainty to operations between the EU and Canada by recognising the principles of the EU internal aviation market and of a Community carrier.

What changes can passengers and the industry expect from the Agreement?

In 2007, 9 million people were travelling between the EU and Canada. A study launched by the European Commission suggested that an open agreement would generate an additional 0.5 million passengers already in its first year. After a few years, 3.5 million additional passengers are expected to make use of the opportunities of an open aviation area between the two partners. The Agreement gives additional freedoms for airlines, including access new markets, full pricing freedom, and improved way of regulating the industry. An increase in direct flights between the EU and Canada is also expected, as well as more competition and lower prices.

What are the economic benefits of the Agreement?

The Agreement will directly contribute to further develop the EU-Canada transatlantic trade. Aviation is crucial for bringing Canada and the EU closer together in facilitating the flow of people and valuable goods. The opening of our aviation markets could bring economic benefits of at least € 72 million and more than 1000 jobs already in the first year.

What are the new rights for EU airlines?

• The possibility for any "Community air carrier" to fly between any point in the EU to any point in Canada, without any restrictions on the number of flights. This freedom did not exist before.
• Freedom to enter into commercial arrangements with other airlines, i.e. code-share agreements, which are important for airlines when serving a large number of destinations, and no restrictions for airlines to establish their tariffs in line with competition law.
• The Agreement contains provisions for the phased market opening linked to the granting of greater investment freedoms by both sides:

1. Phase one takes effect from the start. Airlines will have unlimited freedoms to operate direct services between any point in Europe and any point in Canada. There will be no more limitation on the number of airlines flying between the EU and Canada, and on the number of services operated by any airline. Cargo airlines will have the right to fly onward to third countries.
2. Phase two starts as soon as Canada takes the steps necessary to enable European investors to own up to 49% of a Canadian carriers' voting equity (up from 25% now). Then further traffic rights will be granted, including the right for cargo to operate services to third countries from the other party to third countries without connection to their point of origin.
3. Phase three begins once both sides enable investors to set up and control new airlines in each others' markets. Then passenger airlines will be able to fly onward to third countries.
4. Phase four is the final step with full rights to operate between, within and beyond both markets, including between points in the territory of the other Party (cabotage). It will be granted once both sides complete steps to allow the full ownership and control of their carriers by the others' nationals.

Which rules applied for EU-Canada services until now?

Despite a close network of bilateral aviation arrangements, eight Member States do not yet have an agreement with Canada. Furthermore, many existing agreements are old and do not offer full access to the respective markets. In some agreements, even the number of weekly flights is restricted, and prices are controlled. Existing bilateral agreements between Member States and Canada will be replaced by the EU agreement.

How will the EU and Canada cooperate on regulatory issues?

The Agreement deals with regulatory issues in order to give greater opportunities to airlines in areas where Canada, in the past, was very restrictive, such as tariff control, pricing, statistics or operating conditions. Airlines can now freely set their tariffs in line with competition law. In the field of safety and security, Canada and the EU are moving towards mutual recognition and one-stop security. This would mean that both partners finally recognise the high level of their respective security and safety systems, and would avoid double checks by authorities. The Agreement provides for a strong mechanism for the application of a non-discriminatory competitive framework. It ensures that airlines cannot be discriminated in terms of access to infrastructure or state subsidies. This would be a novelty in such international aviation agreements. A groundbreaking element is the provisions on environment establishing close cooperation between the Parties to mitigate the effects of aviation, notably global warming.

How is the implementation of the Agreement being monitored?

The Agreement establishes a new governance mechanism: the EU-Canada Joint Committee. It will oversee the implementation of the Agreement, including the facilitation of close regulatory cooperation. The Joint Committee will in particular:

• confirm the move to a next phase of implementation;
• discuss important operational issues and market developments;
• ensure the non-discriminatory treatment of operators;
• make proposals to further develop the agreement
• discuss other issues of bilateral or international importance;
• make decisions where provided for in the agreement.

When will the Agreement be applied?

The rights will become applicable as from the date of signature which is expected to take place in the first half of 2009.

Source: European Commission