15 Aviation
| (27734)
11829/06 +ADD 1-2
COM(06) 396
| Draft Regulation on common rules for the operation of air transport services in the Community (recast)
|
| Legal base | Article 80(2) EC; co-decision; QMV
|
| Department | Transport |
| Basis of consideration | Minister's letter of 24 May 2007
|
| Previous Committee Report | HC 34-xxxviii (2005-06), para 5 (18 October 2006)
|
| To be discussed in Council | 7-8 June 2007
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
15.1 Three Regulations, Regulation (EEC) No 2407/92, Regulation
(EEC) No 2408/92 and Regulation (EEC) No 2409/92, collectively
known as the Third Aviation Package, set out common rules for
air transport services in the Community in order to liberalise
the market.
The document
15.2 This draft Regulation would recast, that is consolidate and
revise, the three 1992 Regulations into one Regulation. The proposal
follows a public consultation and an assessment by the Commission
(and annexed to the proposal) of the impact of no change to the
existing regime or a revision and simplification of the regime,
with a series of measures to address the problems identified.
The revision cuts across many areas in aviation, including safety
and licensing, consumer protection and route development. Its
key elements are:
- operating licences — before being granted an
operating licence carriers would be required to demonstrate a
greater level of financial robustness than at present in order
to protect against airline failures. There would also be tighter
restrictions on the leasing of aircraft and crews ("wet leasing")
from third countries, which would only be allowed for a shorter
period and when certain safety guarantees had been given. This
would have a significant impact on the current operating practices
of some UK carriers;
- public service obligations (PSOs) and traffic
distribution rules (TDRs) — for
PSOs the conditions under which socially-necessary but uncommercial
air services, for instance to remote islands, may be subsidised
are limited in order to minimise distortions to the single market.
TDRs are intended to be used for operational purposes to ensure
an appropriate division of traffic between a number of airports
serving the same city. A number of Member States have been accused
of abusing the PSO procedures to prevent the legitimate commercial
operations of low-cost carriers (including EasyJet). Similarly,
there is some evidence that TDRs have been used to discriminate
against some carriers in some Member States. The draft Regulation
would tighten the rules on PSOs and TDRs; and
- consumer issues —
the draft Regulation addresses two issues about which consumer
groups (including the UK Air Users' Council) have concerns. First,
airlines would be required to quote prices inclusive of all taxes,
fees and charges, particularly on websites. Present practice varies
and direct comparison between airlines is difficult. Secondly,
differential pricing based on country of residence, which can
currently lead to different prices being quoted for the same flight
depending on the country in which the booking is made, would be
stopped. Additionally powers of Member States to regulate air
fares would be abolished.
15.3 When we considered the document in October 2006
we noted the Government's view that the general thrust of the
draft Regulation was in line with the Government's policy of supporting
the development of a fully-liberalised Community aviation market.
But we recorded also detailed comments from the Government:
- its concern that proposed extension
from two to three years of the period covered by start-up carriers'
business plans will have little effect on the incidence of airline
failures;
- its concern that tighter controls on wet-leasing
might have significant financial implications for carriers whose
fleets contain a high proportion of leased aircraft. The Department
will work closely with the industry to develop a fuller understanding
of these implications;
- although proposals in relation to PSOs were generally
welcome, its need for clarification of certain definitions and
to ensure that the proposals will actually address misuse of the
PSO mechanism;
- its welcome in principle for Commission powers
to approve TDRs and designate airport systems, which should lead
to better enforcement of this mechanism across the Community;
- its wish to consider carefully the impact of
the provisions on pricing; and
- its welcome for abolition of powers for Member
States to regulate air fares.
We commented that, whilst the basic framework for
the common market in air transport services would remain, this
draft Regulation would introduce important modifications, but
said that before considering the matter further we wanted to see
the outcome of the Government's consultations and a Regulatory
Impact Assessment. Meanwhile the document was not cleared.[50]
The Minister's letter
15.4 The Secretary of State for Transport (Mr Douglas
Alexander) writes now about how matters are developing. On consultation
he tells us that his department conducted one with interested
parties, which included a "stakeholder symposium". This
generated a significant amount of interest from industry and twenty-three
separate responses. Amongst matters commented on were the proposed
restrictions on wet-leasing of aircraft and crew from outside
of the Community and issues of licensing, pricing and PSOs. The
Minister encloses a partial Regulatory Impact Assessment which
takes account of the outcome of the consultation.
15.5 On the negotiation of the text of the proposed
Regulation in the Council Working Group the Minister says:
- the Commission's original proposals
would have significantly restricted the ability of Community carriers
to lease aircraft with crew from third countries. This was a major
concern for UK charter carriers, many of whom have long-term arrangements
to wet-lease aircraft and crew in from the US for the summer season
and out to the US in the winter months;
- the Government's position has been to allow carriers
to wet-lease both to satisfy both seasonal capacity needs and
to cope with exceptional circumstances such as technical problems,
whilst retaining the ability to monitor leasing for safety purposes
and to prevent carriers from becoming overly-dependent on wet-leasing;
- a considerably modified text now allows wet-leasing
to meet seasonal capacity needs and for this lease arrangement
to be renewable consecutively. It removes the proposed restriction
on wet-leasing with third countries where reciprocal agreements
are not in place;
- the Government is satisfied that the current
text meets the concerns of UK industry, allowing charter carriers
to continue to operate their business model, whilst also ensuring
appropriate safety oversight;
- provision to tighten up the rules for establishing
PSOs on routes vital for the economic development of a region
is welcome, as the process has in recent years been used by some
Member States to protect their national carriers from competition
and as a means of providing direct and indirect state subsidies;
- but the Government has sought to reduce the burden
of the rules on existing PSOs in the UK, nearly all of which are
lifeline routes to and between the Scottish Highlands and Islands;
- the revised text meets this concern, particularly
in creating a de minimis exemption from the notification
procedure for routes of less than 10,000 passengers a year, which
include a number of the PSOs in Scotland;
- the Government could not support a Scottish Executive
preference for extending the contract period for PSO services
to five years believing that on balance this would unduly restrict
access to PSO routes and so go against the Government's general
position in favour of increased liberalisation;
- the Commission text already extends the PSO contract
period to four years from three years and should go some way to
meeting the Scottish Executive objective; and
- the Commission text has been improved satisfactorily
on the issues of the time period necessary for demonstrating financial
fitness (which the Commission proposed to increase from two to
three years) and the definition of "principal place of business".
15.6 The Minister continues that there are two remaining
issues that need to be resolved, and that it is likely that these
will be determined during discussion at the Transport Council
on 7-8 June 2007. The first relates to the scope of the provisions
on the transparent advertising of air fares, which will end the
practice of apparently low headline fares which turn out to be
much higher once various taxes, fees and charges are added. Following
the consultation and some clarifications to the text the Government
now believes that this measure will improve consumer clarity and
allow passengers to compare fares more easily. Although some Member
States are proposing that these rules should apply to intra-Community
flights only, the Government thinks they should apply to all flights
departing the Community, whatever the final destination, a view
broadly shared by the UK industry, and hopes that it will be possible
to achieve this.
15.7 The Minister says the second issue concerns
a proposal by one Member State which would stipulate the social
law applying to airline staff employed outside of that airline's
home country. The Government believes that such provisions are
inappropriate in the context of a Regulation that deals with the
technical matters of airline operations, a view shared by a number
of other Member States. Furthermore, this proposal appears to
cut across established Community legislation on posted workers
and the coordination of social security systems The Government
intends to continue to argue against this text, but if a compromise
becomes necessary it might consider neutral language which simply
asserts that all relevant social provisions of Community law would
apply to such workers.
15.8 Finally the Minister says that the German Presidency
has indicated that it hopes it will be possible to reach a general
approach on this matter at the Transport Council on 7-8 June and
that the European Parliament's plenary reading of the draft Regulation
is expected in July 2007.
Conclusion
15.9 We are grateful to the Minister for his account
of where matters stand on this proposed revision of the Third
Aviation Package. We have no further questions to raise and clear
the document.
50 See headnote. Back
|
