TERRORIST ATTACKS IN THE US
Commission Communication: The repercussions of the terrorist attacks in the United States on the air transport industry.
||10 October 2001 |
|Forwarded to the Council:
||12 October 2001 |
|Deposited in Parliament:
||31 October 2001|
||Transport, Local Government and the Regions
|Basis of consideration:
||EM of 6 November 2001
|Previous Committee Report:
|Discussed in Council:
||16 October 2001 |
25.1 Even before the tragic events of 11 September
2001, the European air transport industry was in financial difficulties.
The Commission describes the industry's underlying condition as
chronically under-capitalised, excessively fragmented and heavily
indebted with a permanent cash-flow problem. This vulnerable aviation
industry was weakened further by the slowdown in economic growth
and last year's increase in the cost of aviation fuel.
25.2 On 21 September, in the wake of the terrorist
attacks, the US Congress adopted emergency measures as part of
an overall package which, according to the Commission, may amount
to $18 billion. The package consists of direct and immediate aid
($5 billion), federal credit instruments ($10 billion) and safety
and security funding ($3 billion).
25.3 The Communication sets out the situation
in the airline industry in the European Community following the
terrorist atrocities of 11 September and the subsequent US aid
25.4 The Communication, which was endorsed by
European Community Transport Ministers on 16 October, reiterates
the Commission's view that Member States must not depart from
Community rules on state aid, and sets out how the Commission
proposes to interpret the rules when dealing with the aftermath
of 11 September 2001.
25.5 The document confirms that assistance from
Member States to the air transport industry must be confined to
for losses incurred as a direct result of the four-day closure
of US airspace following the attacks, with compensation being
paid only to airlines;
underwriting of warrelated third party
risks where the insurance industry was not making cover available,
and this aid should be timelimited one month in
the first instance and harmonised between Member States;
providing funding for enhanced security measures
introduced as a result of 11 September.
25.6 In addition, the Commission:
is taking a favourable
view of requests for exemptions from the Competition Rules for
agreements between airlines to cooperate on schedules and
is suspending the "useitorloseit"
rules for slots in Summer 2002, and is prepared to consider a
suspension for Winter 2002/3, depending on developments this Winter.
25.7 The document also reports on the effect
of US measures on competition between US and Community airlines
and sets out the Commission's intention to propose a code of good
conduct to the US authorities in order to avoid distortions of
competition resulting from the aid received by American airlines.
The Government's view
25.8 In his Explanatory Memorandum of 6 November
2001, the Parliamentary Under-Secretary of State at the Department
of Transport, Local Government and the Regions (Mr David Jamieson)
"The UK has strongly
supported the central thrust of the Commission's proposals. European
airlines were at a crossroads before the events of 11 September,
with several national carriers facing difficult commercial futures,
and the key to a more efficient EU airline industry is consolidation.
We support the Commission's position that state aid to airlines
should be limited to measures designed to address losses arising
directly from the events of 11 September, and should not become
an obstacle to overdue rationalisation in the European industry.
"The Government has moved quickly to underwrite,
on a temporary basis, third party war risk insurance for UK airlines
and service providers to the airline industry, an initiative which
has subsequently been widely copied elsewhere. We are considering
whether further aid should be paid to the UK airline industry,
and will take the Commission's guidelines fully into account in
"The UK strongly supports the Commission's proposal
to open a dialogue with the US on possible market distortions,
as UK carriers British Airways and Virgin Atlantic are more exposed
than most EU airlines to predatory behaviour on North Atlantic
routes. However, this support is without prejudice to our position
on the Commission's desire for a full mandate for negotiations
on a Transatlantic Common Aviation Area. The UK has so far withheld
support for a mandate on the grounds that we are actively pursuing
a bilateral agreement with the US, and that remains our position."
25.9 We welcome the general position taken
by the Commission that Member States must not depart from the
Community rules on state aid. We also welcome the special circumstances
under which Member States may provide some temporary and conditional
assistance to the airline industry, such as compensation for the
four days when US airspace was closed, funding for extra security
measures and underwriting third-party war risk insurance. But
clearly the underlying structural weaknesses in the industry need
to be addressed.
25.10 We have no questions and clear the document