Breakthrough in EU–US second-stage Open Skies negotiations: Kallas welcomes draft agreement

"A process has been agreed towards the further expansion and consolidation of the transatlantic aviation market. Both sides have agreed to increase regulatory co-operation, and remove the barriers to market access that have been holding back the development of the world's most important aviation markets. Building on the success of the 2007 EU-US Open Skies Agreement, this draft deal represents a significant breakthrough in the process of normalising the global airline industry". In economic terms, the creation of a full EU-US Open Aviation Area has been estimated to be worth up to 12 billion euro in economic benefits and up to 80.000 new jobs. Negotiators also made significant progress in agreeing a new framework for jointly addressing the environmental effects of aviation, as well as advances in the areas of security, competition, and social matters. Vice-President Kallas will submit the draft agreement for approval to the Transport Council in June under the Spanish Presidency.

Following the launch of second-stage negotiations in May 2008 and seven further rounds of negotiations, negotiators today completed the detailed work on a new agreement. The European Union and the United States signed an air transport agreement in 2007 that has been applied since 30 March 2008. This agreement fulfils the mandate given in the last EU-US Summit in November 2009 to reach a balanced agreement in 2010.

The stage one agreement was arguably the most important air services agreement in the world, allowing open market access for air services between all 27 Member States and the US - markets that together make up almost 60 per cent of global aviation. Furthermore, it created an unprecedented regulatory platform to address all mutual concerns related to EU-US air services.

However, the 2007 agreement did not directly address the key issue of reform of airline ownership and control rules. The provisional agreement reached this week includes a commitment to engage in a process towards such reform. The European Union, based on the positive experience of the EU internal market, has long pressed for such an outcome, arguing that it would represent a key step towards liberating the airline industry from the outdated regulatory constraints in the area of foreign investment that prevent it from acting like any other industry. The provisional agreement sets out a number of incentives to encourage reform: When the United States changes its legislation to allow EU investors majority ownership of US airlines, the EU will reciprocally allow majority ownership of EU airlines by US investors and US airlines will benefit from additional market access rights to and from the EU. Progress towards this outcome will be reviewed regularly.

The negotiators also achieved significant improvements in terms of regulatory cooperation:

• The agreement will strengthen cooperation on environmental matters by requiring the compatibility and interaction of market-based measures (such as emission trading schemes) to avoid duplication; by promoting greater transparency for noise-based airport measures; and by enhancing green technologies, fuels and air traffic management. This cooperation is key to effectively decarbonising international aviation.
• For the first time in aviation history, the agreement includes a dedicated article on the social dimension of EU-US aviation relations. This will not only ensure that the existing legal rights of airline employees are preserved, but that the implementation of the agreement contributes to high labour standards.
• The agreement will raise the already high level of cooperation on security to better allocate resources at threats to the aviation system by promoting maximum mutual reliance on each other's security measures as well as swift and coordinated responses to new threats.
• The agreement further extends the role of the EU-US Joint Committee, the body that monitors the implementation of the agreement and coordinates the various work streams of regulatory cooperation. The new rules will reduce red tape (e.g. by mutual recognition of each other's regulatory decisions) and avoid the wasteful duplication of resources (e.g. joint safety initiatives, one-stop security, facilitation of passengers' travel).
• Market access will be further opened with EU carriers gaining further access to US Government-financed traffic ("Fly America"). Subject to certain changes to the legal framework for noise-based airport restrictions, EU airlines will gain in the future new commercial opportunities to fly between the US and non-EU countries. Furthermore, a number of obstacles to EU and US investments in 3rd countries' airlines will be removed.

The ground-breaking first-stage agreement reached in 2007 had established a clear agenda and a timetable for second-stage negotiations between the European Union and the United States aimed at further liberalisation and enhanced regulatory cooperation. Second-stage negotiations were launched in May 2008, followed by seven rounds of negotiations. At the initiative of the Commission, two labour forums were also convened to better assess the consequences of a change of airline ownership and control rules for airline employees. At their Summit in November 2009, EU and US leaders had expressed their aim to reach a second-stage air transport agreement in 2010, which includes benefits for both sides.

The European Union and the United States' markets are the largest aviation markets in the world. Together, they represent approximately 60% of global aviation. The economic benefits associated with the implementation of this second-stage agreement have been independently estimated to be equivalent to the transatlantic benefits to be expected from a successful conclusion of the Doha round of trade liberalisation negotiations.

The Commission will seek the approval of the agreement by the 27 Transport Ministers and the European Parliament.

Facts and figures - Benefits of opening up the EU- US aviation market

The potential economic benefits of removing the barriers to the EU-US transatlantic market are very significant (Booz Allen Hamilton, January 2007)

• In economic terms, it could be worth up to 12 billion euro in economic benefits and up to 80,000 new jobs.
• It would create the possibility of an additional 26 million extra passengers on transatlantic flights over a period of 5 years This compares with current annual traffic of just under 50 million (2007). At the end of the five years, this will mean that the market will be 34% bigger with the agreement than without the agreement.
• By eliminating the bilateral agreements and their restrictions on traffic rights, we could envisage a reduction in the cost of tickets for companies and private customers, with consolidated economic benefits of between 6.4 and 12 billion euro over a period of 5 years.
• The removal of barriers could lead to the creation of around 80,000 jobs (spread more or less equally between the US and the EU).
• The cargo market would see growth of between 1 and 2 percent, which is highly significant given the size of the market globally and the size of the European and American industry.