Not cleared from scrutiny; further information requested
(a) Commission Communication about competition in air transport; (b) Proposed Regulation about competition in air transport
(a) —; (b) Article 100(2) TFEU, ordinary legislative procedure, QMV
(a) (38823), 9744/17 + ADD 1, COM(17) 286; (b) (38826), 10146/17 + ADDs 1–2, COM(17) 289
14.1As a follow-on from its 2015 Aviation Strategy for Europe, on 8 June 2017 the Commission presented its Open and Connected Europe package, which includes a number of provisions which will apply to the UK after it leaves the EU. A Communication sets out the overall context of the package and the actions the Commission is taking, which aim to deliver on two core priorities: to maintain leadership in international aviation, by safeguarding competition and facilitating investment, and tackling limits to growth in European skies.
14.2The proposed initiatives that are intended to deliver these priorities comprise a Regulation to safeguard competition in air transport, guidelines on the ownership and control rules for EU airlines and on public service obligation rules, as well as a number of recommendations regarding air traffic management service continuity.
14.3The Government states that it welcomes the Commission’s continued recognition of the importance of air transport and commitment to ensuring that EU aviation would remain globally competitive, and provides more detailed comment on the Commission’s initiatives on an individual basis.
14.4The proposed Regulation to safeguard competition in air transport against subsidisation and unfair pricing practices in the supply of air services from third countries (10146/17) repeals and replaces Regulation (EC) 868/2004, which has not been used since its introduction, and is generally considered unfit for purpose due to its narrow scope. The proposal would enable individual carriers and Member States to make complaints in their own right, and introduces investigation procedures which can cover both the violation of applicable international obligations and practices adopted by a third country or third-country entity affecting competition and causing injury or threat of injury to Union air carriers. The Regulation is of relevance to the UK, which is likely to become a third country with respect to the Single Market in aviation when it leaves the European Union.
14.5The Government noted a number of potential subsidiarity issues with the proposed Regulation, which it is exploring with other Member States. Our subsidiarity assessment, provided later in this chapter, concludes that there is not a sound basis for the issuing of a reasoned opinion; however, the Government may seek to modify aspects of the proposal to address any concerns that it may have.
14.6The interpretive guidelines on the application of common rules for the operation of air services in the EU are intended to provide guidance for Member States’ competent authorities (the Civil Aviation Authority in the case of the UK) when assessing the compliance of carriers with this requirement. They set out how the Commission considers the provisions of the Regulation should be interpreted, but do not create new legal obligations. They are particularly relevant to UK carriers in the context of Brexit, as EU officials have already warned airlines such as Ryanair and easyJet that they will have to relocate their headquarters or sell off shares to European nationals if they want to continue flying routes within continental Europe after Brexit.
14.7Interpretive guidelines are also provided for public service obligation rules (PSOs) on air transport routes. These may be imposed on routes which are vital for the economic development of the region they serve. The guidelines are in line with the UK’s interpretation of the current rules. The Government welcomes the interpretative guidelines on both the ownership and control rules for EU airlines and on public service obligation rules.
14.8In a separate Staff Working Document the Commission recommends a number of actions which it considers would ensure continuity of service and minimise the impacts of air traffic control strikes, which include: putting in place practices to minimise the impact of strikes; encouraging service providers (NATS in the UK) to enter into cooperative arrangements to improve service continuity in the event of strikes, with the inter-governmental organisation EUROCONTROL, which acts as the air traffic network manager under EU legislation, being given a role in overseeing the progress of these arrangements; and making progress in implementing the Single European Sky legislation including the SES II+ amendments. The Minister welcomes the increased impetus the recommendations create for Member States that have problems with industrial unrest in their air traffic control organisations to address them, but observes that the UK does not have problems of this kind. The Minister expresses concern that, if the European Commission were to seek to enforce these recommendations, it might be perceived as a possible restriction on the right to strike, and lead to industrial unrest.
14.9Turning to the Commission’s planned further activity, the Government told us that it would consider proposals for mandates to negotiate further EU Comprehensive Aviation Agreements on a case-by-case basis. The Government supports the Commission’s proposal to review the existing ownership and control rules.
14.10The UK has the largest aviation sector in the EU, and the EU is the single biggest destination market for UK carriers. Changes to the basis upon which UK carriers can access the EU aviation market could therefore significantly impact their operations. For example, the EU does not currently permit carriers outside the European Common Aviation Area (ECAA) to provide flights between and within EU Member States: loss of this access could significantly impact low-cost carriers such as easyJet and Ryanair. easyJet has recently responded to the lack of clarity about future market access arrangements by establishing easyJet Europe in Austria. The precise implications of this decision for the UK are as yet unclear.
14.11The Commission’s plans for the future development of the EU’s aviation sector are of importance for the UK, both while it remains an EU Member State (during which time changes to the regulatory framework will apply to UK carriers), and also when the UK leaves the EU and assumes third country status in relation to it, when EU rules which apply principally to third countries (such as the proposed Regulation), will apply to the UK and its carriers.
14.12On this basis we are keeping the Communication and the proposed Regulation under scrutiny, pending further information from the Government about developments on the Open and Connected Europe package and responses to the questions provided below.
14.13We want to hear more about the Government’s developing views, and those of other Member States, on the points in the proposed Regulation (10146/17) to which the Government has drawn our attention, notably:
14.14We ask the Government to explain how it has pursued its concerns about the various implications of these recommendations, and what clarifications and/or reassurances it has received regarding:
14.15Regarding Brexit, we ask that the Government clarify:
14.16We retain the Communication and the Regulation under scrutiny and ask that the Government respond to the above questions by 6 December 2017.
(a) Commission Communication: Aviation: Open and Connected Europe: (38823), + ADD 1, COM(17) 286; (b) Proposed Regulation on safeguarding competition in air transport, repealing Regulation (EC) No 868/2004: (38826), + ADDs 1–2, COM(17) 289.
14.17The EU has a range of policies in relation to civil aviation, important elements of which are the Single European Sky initiative, supported by the European Aviation Safety Agency, and aviation agreements with third countries.
14.18The EU Single Market in air services was created as a result of three packages of regulatory measures put forward by the Commission in the 1990s. The final package removed all remaining restrictions on airline operators in the EU, creating the concept of a ‘Community carrier’ to replace national airline carriers. ‘Community carriers’ could access any intra-EU route and offer services to customers without prior authorisation or permission from authorities in those Member States. Accordingly, an airline based in the UK can offer routes not just from the UK to any other EU Member State, but also routes between other EU Member States (without having to fly via the UK), as well as domestic routes in other Member States. In order to be a ‘Community carrier’, airlines have to comply with the following requirements:
14.19Common EU rules have also been adopted on competition, safety, security, consumer protection and environmental protection in aviation. Over 140 pieces of EU legislation currently implemented in the UK relate to aviation, including those relating to the Single European Sky, SESAR, and the European Aviation Safety Agency (EASA).
14.20EU membership also forms the basis upon which UK airlines access the aviation markets of some third countries. The Commission has acquired more competency to negotiate on behalf of the whole of Europe for air traffic agreements with third countries. While the UK has 111 bilateral air services agreements with third countries, these are complemented or (in cases where two agreements exist for the same country) superseded by EU level agreements, including with the US, Canada, and neighbourhood countries such as Morocco and Israel.
14.21In December 2015 the Commission presented its Communication, An Aviation Strategy for Europe, which was intended to set out future policy for the EU aviation sector, aimed at maintaining EU leadership in international aviation and tackling limits to growth in EU skies. It addressed a range of issues concerning jobs and growth, market access and competition, safety and security, passenger rights, airport, slots, ground-handling and charges and third country relations. The then Government gave the previous Committee a generally favourable assessment of the Commission’s plans, but also made some cautionary remarks, drawing particular attention to ongoing attempts by the Spanish Government to exclude Gibraltar from the scope of EU aviation legislation.
14.22The Minister’s account of the Government’s current views, including on Brexit issues, is interleaved throughout the account of the individual proposals below.
14.23The Commission has now published an Open and Connected Europe package, which follows on from the Aviation Strategy for Europe. The package is comprised of a Communication, document (a), which sets out the overall context of the package and the actions the Commission is taking, and specific initiatives which aim to deliver on two core priorities from the Aviation Strategy for Europe:
14.24The main aim of the Communication is to give an update on activities that have taken place since the 2015 strategy was published, to introduce the initiatives being published alongside the Communication and to give some recommendations for further work. The four initiatives being published as part of the package are:
14.25The Minister (Lord Callanan) writes that the Government welcomes the Commission’s continued recognition of the importance of air transport and, with the publication of this package, its continued commitment to ensuring that EU aviation would remain globally competitive, with the ability to take advantage of the opportunities offered by a fast-changing global economy.
14.26Regarding Brexit, he prefaces his comments on the policy implications of the individual documents with the Government’s proviso that until Brexit negotiations are concluded the UK will remain a full member of the EU, during this period the Government will continue to negotiate, implement and apply EU legislation, and the outcome of the negotiations would determine what arrangements would apply in relation to EU legislation after Brexit.
14.27This proposal is the most substantial item in the Open and Connected Europe package. Regulation (EC) 868/2004, which would be replaced, was intended to provide protection against subsidisation and unfair pricing practices in the supply of air services from third countries. Since its adoption in 2004 the Regulation has not been used, and is generally considered to be unfit for purpose due to a narrow scope (only covering unfair pricing practices or subsidisation), lack of a specific complaint mechanism and limiting those able to make a complaint to “community industry”—individual carriers and Member States are unable to make complaints in their own right.
14.28The proposal aims to introduce legislation that fixes these perceived deficiencies. It would enable complaints to be made to the Commission by interested parties who suspect, or have evidence that, one or more EU carriers are being harmed by the unfair practices of a third country (for instance, discrimination in airport access, slot distribution or unfair subsidies to third country carriers). Investigations may have two purposes: they may pertain either to the violation of applicable international obligations (the so-called ‘violation’ track), or to practices adopted by a third country or third-country entity affecting competition and causing injury or threat of injury to Union air carriers (the so-called ‘injury’ track).
14.29The proposal also sets out:
14.30In his general remarks on the proposal, the Minister said that:
14.31The Minister also indicated that the Government was currently considering the proposal and its position, particularly in the following areas:
14.32The Minister added that at the 14 June 2017 Aviation Working Group, where the Commission presented this proposal, other Member States raised concerns regarding the above areas and were similarly considering their positions on these points.
14.33In his Explanatory Memorandum the Parliamentary Under Secretary of State commented that:
14.34The points provided below suggest that there are insufficient grounds for issuing a reasoned opinion in relation to the proposed Regulation:
14.35On the basis of the available evidence, the subsidiarity concerns hinted at by the Government fall short of those required to merit the drafting of a reasoned opinion; however, the Government’s wider policy concerns certainly merit ongoing scrutiny by the Committee.
14.36Regulation (EC) No 1008/2008 on common rules for the operation of air services in the EU includes a nationality requirement for obtaining an operating licence to transport passengers, cargo and mail by air in the EU. For air carriers in the EU, Member States and/or nationals of Member States must own more than 50% of the carrier and effectively control it (except as provided for in an agreement with a third country to which the EU is a party). The new guidelines are intended to provide guidance for Member States’ competent authorities (the Civil Aviation Authority in the case of the UK) when assessing the compliance of carriers with this requirement. The guidelines include case studies and best practice from both the Commission and competent authorities at Member State level. They set out how the Commission considers the provisions of the Regulation should be interpreted, but do not create new legal obligations.
14.37The Minister commented that the Government welcomed these guidelines which aimed to put the rules for the ownership and control of airlines into the broader EU policy context. He explained the Government view that they would bring helpful clarity to Member States and investors, particularly with regard to EU nationality rules and how the notion of effective control of airlines should be assessed.
14.38The Communication also stated that “as a next step, the ownership and control rules will be reviewed by the Commission and if need be adapted to remain relevant and effective in a fast-changing aviation market”.
14.39Regarding this review of the rules on ownership and control of EU airlines (and also of PSOs) the Minister commented that:
14.40In order to maintain appropriate scheduled air services on routes which are vital for the economic development of the region they serve, Member States may impose public service obligations (PSOs) on these routes. The aim of the guidelines is to bring greater transparency, consistency and clarity to EU airlines and Member States’ authorities as to how the Commission interprets the current rules. The guidelines provide greater certainty on the four criteria that determine the necessity and adequacy of a PSO route and are in line with the UK’s interpretation of the current rules. They also make it clear for the first time that onward connectivity can be used as a factor when deciding on PSOs, and that there is continued recognition that airport slots can be reserved from a slot pool if they are available.
14.41The Minister told us that:
14.42The Commission has made a number of recommendations on actions it feels would ensure continuity of service and minimise the impacts of air traffic control strikes. These are grouped into three areas.
14.43First, there are recommendations to put in place practices to minimise the impact of strikes, including promoting social dialogue within air traffic control organisations, providing a minimum notice period of strikes, requirements on staff members having to provide individual notification of their intention to participate in a strike, preserving overflights in the event of strikes, and arranging any strikes to avoid peak traffic periods.
14.44The second recommendation encourages service providers (NATS in the UK) to enter into cooperative arrangements to improve service continuity in the event of strikes. It is recommended that the inter-governmental organisation EUROCONTROL, which acts as the air traffic network manager under EU legislation, is given a role in overseeing the progress of these arrangements.
14.45The third area of recommendations encourages progress in implementing the Single European Sky legislation including the SES II+ amendments, which is currently stalled in the Council. The Commission also says that it will work with stakeholders to explore the concept of a “more integrated operating airspace with a view to ensuring optimal continuity of service”. The Communication and supporting material does not define this concept nor specify how the Commission will take it forward.
14.46The Minister said that:
14.47The Minister concluded that, in summary:
14.48The Communication also includes recommendations for further action, following on from the package. These include, without any indication of a timescale:
14.49On EU Comprehensive Aviation Agreements the Minister said that:
113 European Commission, (8 June 2017).
114 European Commission, COM(17) 286 final.
115 European Commission, COM(17) 289 final.
116 European Commission, C(2017) 3711 final.
117 The Guardian, (22 March 2017).
118 European Commission, C(2017) 3712 final.
119 European Commission, SWD(2017) 207 final.
120 See .
121 House of Lords EU Internal Market Sub-Committee, (chapter 7).
122 The Guardian, (22 March 2017).
123 (37379) 14992/15 + ADD 1: see Eighteenth Report HC 342–xvii (2015–16), (13 January 2016).
124 Defined as “the Community air carriers supplying like air services as a whole or those of them whose collective share constitutes a major proportion of the total Community supply of those services”.
127 See .
128 See .
129 (34777), 7615/13 ADDs 1–2, (35071), 11490/13, (35072), 11496/13, (35073), 11501/13 + ADDs 1–2: see Thirty-ninth Report HC 219–xxxvii (2014–15), (24 March 2015); Thirty-fifth Report HC 219–xxxiv (2014–15), (4 March 2015); Twenty-fifth Report HC 219–xxiv (2014–15), (10 December 2014); Twentieth Report HC 219–xix (2014–15), (19 November 2014); Sixth Report HC 219–vi (2014–15), (9 July 2014); Fifth Report HC 219–v (2014–15), (2 July 2014); Forty-eighth Report HC 83–xliii (2013–14), (7 May 2014); Thirteenth Report HC 83–xiii (2013–14), (4 September 2013); Ninth Report HC 83–ix (2013–14), (10 July 2013); and Thirty-ninth Report HC 86–xxxviii (2012–13), (17 April 2013).
20 November 2017