The European Commission (the Commission) is the European Union’s regulatory body for aviation. Within the Commission, the Directorate General for Mobility and Transport (DG Move) is responsible for developing and implementing EU transport policies. The Directorate General for Competition (DG Comp) is responsible for the application of EU competition law in the air transport sector, including state aid matters since 2010.
The Commission is responsible for ensuring the implementation and, where applicable, enforcement of EU law by the member states, national agencies and companies. If a member state fails to implement EU legislation, the Commission may, after it has followed certain procedural warning steps, bring a case against it before the European Court of Justice (ECJ).
EU air transport policy covers a wide variety of aspects of the air transport sector, including the EU single aviation market and liberalisation of air transport (subject to conditions and limitations) on routes between the EU and third countries, aviation safety, and air traffic control. Other important fields include slot allocation, ground handling services, computerised reservation systems (CRS), noise emissions, denied boarding, baggage controls, personnel licensing, accident investigation and occurrence reporting, airline passenger liability and aviation security.
The applicable legislation can be broken down into the following four broad categories:
- implementation and functioning of, and access to, the EU single aviation market;
- aviation regulation including safety, environmental and consumer protection; and
- relations between the EU (and its member states) and third countries.
EU single aviation market
The implementation of a single aviation market across the EU is one of the main objectives of EU regulation in the aviation sector. The EU sought to realise this goal through the adoption of three liberalisation packages, which have harmonised national laws for airfares, market (route) access and capacity, and introduced the application of the EU competition rules. The first package, adopted in 1987, initiated the relaxation of existing national rules. For instance, it limited the rights of governments to object to the setting of new fares and provided for limited liberalisation of capacity sharing. The second package, adopted in 1990, introduced further flexibility for the setting of airfares and capacity sharing. The third liberalisation package established a single EU air transport market, as of 1 January 1993. The third legislation package, initially consisting of Regulation (EEC) Nos. 2407/92, 2408/92 and 2409/92, was subsequently consolidated into Regulation (EC) No. 1008/2008.
Regulation (EC) No. 1008/2008 covers the following areas:
- licensing of carriers: issuance, suspension and revocation of EU-wide air carrier operating licences. For an air carrier to obtain an operating licence, it must comply with the requirements set down in the regulation, including ownership and control requirements, financial fitness and insurance;
- market access: establishment of the basic principle of free access for EU air carriers to intra-EU air routes, according to which all EU air carriers are granted unconditional access to all member states’ territories (including freedom to provide cabotage, ie, domestic air services within a member state); and
- pricing: liberalisation of intra-EU airfares, setting an imposition of an obligation on air carriers to publish airfares in a clear and unambiguous way.
On 3 February 2019, a regulation to amend article 13(3)(b) of Regulation (EC) No. 1008/2008 in order to bring the wet-lease regime of Regulation (EC) No. 1008/2008 in line with the ‘open’ wet-lease regime provided for in the EU-US Air Transport Agreement came into force. The recitals to the amending regulation note that the Commission is in any event undertaking a review of Regulation (EC) No. 1008/2008, including its wet-leasing provisions, which may lead to a more general revision in future.
Separate regulations deal with other aspects of access to the EU single aviation market, including Regulation (EEC) No. 95/93 on slot allocation at congested airports and Directive 96/67/EC on access to ground handling services.
EU competition law is fully applicable to the aviation sector. The Commission has full powers to apply articles 101 (restrictive agreements and concerted practices), 102 (abuse of dominance) and 107-109 (state aid) of the Treaty on the Functioning of the European Union (TFEU), as well as the merger control provisions contained in Regulation (EC) No. 139/2004. Regulation (EC) No. 487/2009 (replacing Regulation (EEC) No. 3976/87) enables the Commission to grant block exemptions to certain agreements and forms of cooperation normally restricted by articles 101 and 102 TFEU. Block exemptions were used in the past to exempt certain forms of revenue-sharing and capacity coordination, computer reservation systems and ground handling as well as the International Air Transport Association (IATA) slot and tariff coordination conferences. However, these block exemptions have been gradually phased out and no aviation-specific block exemptions are currently in force. The Commission has so far expressed no intention to issue any new block exemptions for the aviation sector.
Aviation regulation relating to safety, environmental and consumer protection
The EU has adopted a regulatory framework in the field of aviation safety, with the establishment of the European Aviation Safety Agency (EASA), and of air traffic control with the Single European Sky (SES) initiative (see question 24). It has also adopted rules dealing with environmental issues such as noise and aircraft emissions, as well as consumer protection (eg, compensation and assistance in the event of denied boarding or flight cancellation).
External aviation relations
In the field of external aviation relations, the ECJ declared in the 2002 Open Skies judgments that the Commission has exclusive competence in certain limited areas previously covered by international bilateral agreements. More importantly, nationality clauses, which reserve the right to operate services between contracting states to the carriers that are majority owned and effectively controlled by nationals of those states, were held to infringe the principle of freedom of establishment enshrined in articles 49-54 TFEU. As a result, the existing bilateral agreements concluded between the member states and third countries had to be amended or replaced. After these judgments, the Commission received a Council mandate to negotiate horizontal agreements between the EU and third countries to rectify the situation and, with regard to the US, a transatlantic open aviation area (OAA).
The negotiation of an EU-US air transport agreement took place in two stages. A first-stage agreement came into force on 30 March 2008 and allowed for the liberalisation of air services between the EU and the US in a number of important respects, although certain significant limitations continued to apply. The main provisions can be summarised as follows:
- any EU carrier has the right to fly between any point in the EU and any point in the US, without any restrictions on pricing, capacity or frequency (although this right does not extend to flights within the US);
- EU and US carriers have the right to operate flights beyond the EU and the US to third countries;
- foreign investment (including EU) in US airlines remains capped at a maximum of 25 per cent of voting capital;
- all European airlines must be recognised as EU carriers by the US authorities, allowing for consolidation between EU airlines;
- EU airlines are granted certain access rights to the US ‘Fly America’ programme;
- convergence mechanisms were established concerning competition law enforcement, state aid and security;
- joint EU-US approaches in international organisations and in relations with third countries were developed;
- an EU-US technical cooperation was established in relation to climate change;
- institutional mechanisms were put in place, including a dispute settlement procedure with arbitration provisions; and
- provisions relating to franchising, branding, code-sharing and wet-leasing were included.
The second-stage agreement, which was signed on 24 June 2010, had the following key outcomes:
- commitment from both the US and EU to aim to remove all remaining access barriers, with an annual progress review;
- enhanced access for EU carriers to the US ‘Fly America’ programme;
- relaxation of the 25 per cent limit on EU-owned voting rights in US airlines (still in force), subject to legislative change;
- provision that the EU will allow majority ownership of EU airlines by US nationals (for the time being still prohibited), subject to legislative change;
- link between the revision of the process for the introduction of noise-based airport restrictions in the EU and additional access rights for EU carriers to fly between the US and non-European countries;
- relaxation of restrictions on EU and US investment in third-country airlines;
- enhancement of the EU-US cooperation on environmental matters;
- inclusion of a dedicated article on the social dimension on EU-US aviation relations; and
- enhancement of the EU-US regulatory cooperation.
However, with significant ownership restrictions and the prohibition for EU carriers to operate US domestic services remaining in place, the second stage agreement failed to produce the OAA originally envisaged by the Commission.
The Commission also has a mandate to negotiate at the EU level horizontal agreements with third countries other than the US, with a view to bringing existing bilateral air services agreements in line with the Open Skies judgments (replacing in particular national ownership and control provisions with an EU air carrier clause). Many EU horizontal agreements have been signed and others are being negotiated. Member states can continue negotiating certain aspects of the agreements, as long as they do not deviate from certain standard clauses developed by the Commission.
Another important pillar of the EU’s external aviation policy relates to the creation of a European Common Aviation Area (ECAA) between the EU and its partners from southern and eastern Europe as well as Iceland and Norway. The aim of the ECAA is to open up new commercial opportunities for the European aviation industry. The agreement ensures a high level of uniformity (including with regard to competition rules) and safety. The ECAA was signed in 2006 and was originally expected to be fully implemented by 2010. However, it only entered into force on 1 December 2017, after finally having been ratified by all member states.
On 7 December 2015, the Commission published a comprehensive strategy for the European aviation sector (the ‘Aviation Strategy for Europe’) with a view to ensuring that it remains competitive. The Commission stated that its goals are to place the EU as a leading player in international aviation, while guaranteeing a level playing field; tackling limits to growth in the air and on the ground; maintaining high EU standards for safety, security, the environment, social issues and passenger rights; and making progress on innovation, digital technologies and investments.
More concretely, in 2017 the Commission adopted interpretative guidelines on the application of Regulation (EC) No. 1008/2008 on the ownership and control of EU air carriers to provide more certainty for investors and airlines alike. The guidelines aim to make it easier for undertakings that apply for or hold an operating licence, to assess whether they are in compliance with EU regulation. The guidelines take into account the Swissair/Sabena decision, in which the Commission established that companies from third countries can enjoy the benefits of the internal market insofar as they remain within the limits set out by the aforementioned regulation concerning ownership and control.
The guidelines have been adopted in the context of its ‘open and connected aviation’ package which was adopted on 8 June 2017 and includes four initiatives to support the achievement of two of the main priorities of the Aviation Strategy for Europe: maintaining leadership in international aviation; and tackling the limits to growth in European skies. The open and connected aviation package initiatives included, in addition to the above-mentioned interpretative guidelines, a legislative proposal (now in force, see below) for a regulation on safeguarding competition in air transport, repealing Regulation (EC) No. 868/2004; interpretative Guidelines on Regulation (EC) No. 1008/2008 on public services obligations; and a Commission staff working document on practices favouring air traffic management service continuity.
Regulation (EU) No. 712/2019 on safeguarding competition in air transport and repealing Regulation (EC) No. 868/2004 came into force on 30 May 2019. It seeks to support fair competition between EU and third-country carriers by empowering the Commission to adopt redressive measures in relation to ‘practices distorting competition’ between EU and third-country carriers. It tackles a number of perceived unfair practices, and in that respect is broader than Regulation (EC) No. 868/2004, which applied only to subsidisation and ‘unfair pricing practices’. It also lowers the evidential bar faced by complainants.
Back to top