Select Committee on European Scrutiny Thirty-Sixth Report

8 Aviation agreements




Draft Decision on the signature and provisional application of the air transport agreement between the European Community and its Member States and the United States of America

Draft Decision on the conclusion of the air transport agreement between the European Community and its Member States and the United States of America

Legal baseArticles 80 and 300 EC; consultation; QMV
Basis of considerationMinister's letter of 14 July 2006
Previous Committee ReportHC 34-xxxi (2005-06), para 4 (14 June 2006)
To be discussed in CouncilPossibly October 2006
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested


8.1 Since 1987 a single market for air services in the Community has been progressively established. Community legislation has extended the scope of this single market beyond purely economic matters to embrace the areas of safety, security, air traffic management, social harmonisation and the environment. The Community has the competence to conclude air services agreements with third countries and to require meanwhile revision of bilateral air services agreements to eliminate provisions discriminatory against other Member States.

8.2 These draft Decisions would authorise the signature, provisional application and conclusion of an aviation agreement between the Community and the Member States on the one hand and the United States of America on the other. They would be a first-stage agreement — a step towards the Community's ambition, shared by the Government, of an open aviation area of the Community and the US.

8.3 When we considered this document last month we accepted that a first-stage agreement is all that is likely to be attainable at the moment. And we noted with approval the caution with which the Government is considering the agreement, particularly in relation to value of whatever Final Rule, which would set out the how the requirement that a US carrier must be under "the actual control of US citizens" is to be interpreted, emerges from the US Department of Transportation. But we said that before considering the document further we should like to hear from the Government as to its conclusions following issue of the Final Rule and its consideration of the package with Community partners. In particular we wanted confirmation that:

  • UK airlines will be, if not better off, at least no worse off than under the present bilateral arrangements; and
  • the agreement is based on truly reciprocal benefits.

Meanwhile the document remained uncleared.

8.4 We also noted the proposed suspension of the application of the agreement with the US to Gibraltar airport and we presumed that until the agreement is applied to Gibraltar airport the existing bilateral arrangements between the UK and the US would continue in operation for Gibraltar airport.[28]

The Minister's letter

8.5 The Parliamentary Under-Secretary of State, Department of Transport (Gillian Merron) now confirms that the US Department of Transportation's Final Rule is unlikely to be published until late August or early September 2006. She says that the Finnish Presidency currently intends to bring the matter forward for consideration at the Transport Council on 12 October 2006.

8.6 The Minister then addresses the specific issues we raised. First, in relation to whether UK airlines would be at least no worse off under the proposed agreement than under the current bilateral arrangements, she tells us that the proposals would represent a significant deregulation compared to the current UK-US bilateral arrangements:

  • restrictions on the number of flights that can be operated, and the points they can operate to and from, including limiting the number of airlines that can operate between Heathrow and the US to two from each side, would be removed;
  • UK airlines would have the right to operate as many flights as they wish from anywhere in the Community to anywhere in the US, as well as securing certain other commercial freedoms; but
  • UK airlines would not be allowed, at least at this first stage, direct access to the US domestic market (or vice versa).

8.7 The Minister comments that it is the Government's view that liberalisation and the removal of bilateral restrictions is generally in the long-term interests of a healthy and sustainable UK aviation industry and can bring significant benefits for consumers, and economic benefits for airports, their regions and the country as a whole. The agreement currently on the table would offer significant benefits, but not the further benefits that might flow from access to the US domestic market. She continues that lifting the current bilateral restrictions on access to Heathrow would represent perhaps the most significant deregulatory element — although its impact would be limited by the very restricted additional capacity currently available at Heathrow. Some UK airlines, such as bmi, would certainly welcome the removal of the current restrictions — on the other hand, it is possible that the two incumbent UK carriers on the Heathrow-US routes, British Airways and Virgin Atlantic, would see some decline in their market power as a result of increased competition. At the same time, they could benefit from the opportunity to offer more services to an open choice of destinations.

8.8 As for whether there is true reciprocity of benefits in the proposed agreement the Minister comments that it is to some extent be a matter of judgement. Whilst any agreement is likely to be based on the principle of reciprocity and the exchange of "mirror" rights between the Community and the US, any assessment of the balance of benefits is complicated by a range of elements, including geographical factors, the commercial aspirations and competitivity of different air carriers, and the wide range of different interests involved on both sides. She adds that assessment is further complicated as the agreement would be concluded at Community level. This means, for example, that US carriers would obtain certain rights to fly within the Community (though not within individual Member States) and Community carriers would obtain the right to fly to the US from anywhere within the Community.

8.9 The Minister continues that in taking a view on the final proposition on offer the Government will need to:

  • reach a judgement, in conjunction with Community partners, about the balance of benefits involved; and
  • take account of the extent to which the agreement seems likely to assist the eventual delivery of the full open aviation area agreement sought by the Community, the prospects for securing a better deal now or in the near future, and the possible consequences and disbenefits of not concluding an agreement.

8.10 Finally, in relation to Gibraltar, the Minister reminds us that the Government is currently in discussion with the Governments of Gibraltar and Spain about the possibility of a new agreement concerning Gibraltar Airport, says that it is hoped that this might in due course lead to Spain lifting its block on Community aviation measures applying to Gibraltar and confirms that in the interim the current bilateral arrangements between the UK and US would need to remain in force in respect of Gibraltar.


8.11 We are grateful to the Minister for this account of the Government's present view of the proposed agreement. We look forward to hearing of its further assessment, particularly in the light of the Final Rule, once issued, and of its consultations with other Member States. Meanwhile we do not clear the document.

8.12 We note the Minister's comments on Gibraltar and urge a speedy satisfactory outcome.

28   See headnote. Back

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