AIR TRANSPORT: QUARTERLY REPORT NO.14 1St QUARTER 2007 (January to March)
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While Bulgaria and Romania joined European Union on the 1st of January 2007 this Antonov An-12, captured here in former Balkan Airlines colours, has seen a sunset for its freight operations within EU along with a fleet of some 20 An-12s in service by Bulgarian operators. AIR TRANSPORT: QUARTERLY REPORT NO.14 1st QUARTER 2007 (January to March) 1 OVERVIEW..................................................................................................................................2 2. HIGHLIGHTS AND KEY DEVELOPMENTS....................................................................3 2.1 REGULATORY.........................................................................................................................3 2.2 AIRLINES................................................................................................................................4 2.3 AIRPORTS...............................................................................................................................9 2.4 SAFETY AND SECURITY ........................................................................................................12 2.5 ATM....................................................................................................................................13 2.6 MANUFACTURERS ................................................................................................................13 2.7 THE ENVIRONMENT ..............................................................................................................14 3. BULGARIA AND ROMANIA, THE LATEST ACCESSION STATES ...............................15 3.1 REGULATORY ISSUES ...........................................................................................................16 3.2 AIR TRANSPORT NETWORKS .................................................................................................17 3.3 AIRLINES..............................................................................................................................18 3.4 AIRPORTS AND AIRSPACE .....................................................................................................21 3.5 DEVELOPMENTS SINCE JANUARY 2007 ................................................................................23 Cranfield University: Quarterly Report Q1 2007 for DG TREN 1 1 Overview The year began with two important developments: the adoption of the first stage agreement on the EU-US bilateral, and the widening of EU borders to include Bulgaria and Romania. After four years of negotiations, the first stage of the EU–US bilateral agreement has now been reached, becoming effective in March 2008. The deal permits any EU or US airline holding an appropriate operator’s licence to provide services between any city in the EU and any city in the US. Unlimited third, fourth and fifth freedom rights feature and the US has accepted the Community air carrier concept. There is some expectation that the new bilateral will be the catalyst triggering long awaited consolidation in the airline industry. Any potential disadvantages for EU carriers can be addressed in the second stage of negotiations scheduled for 2008. The arrival of the two latest accession states increased EU land area by 350,000 square kilometres and added some thirty million to its population. Although Bulgaria has experienced some problems in integrating its air services with the internal aviation market, both new member states have recorded impressive air traffic growth in the first few months of membership. Bulgaria is 83% up on year-to-year traffic figures in the UK market alone, while Romania is slightly ahead in the same market. Low-cost carriers have been at the forefront of network expansion to the new states. In the wider world, AEA airlines reported passenger traffic up 5% in the three months ending February 2007: intra-European cross-border passenger numbers were up 7%. Air freight was not a buoyant market, with freight tonne-kilometres down slightly. The European air transport network was reinforced by LCC activities. Led by Ryanair, these airlines started ninety-four new routes in Q1 2007, generating 470 weekly return flights. One LCC failure was recorded, with Sweden’s FlyMe sinking into bankruptcy. There was a measure of consolidation within the market, where Thomas Cook agreed merger terms with MyTravel and Air Berlin took over LTU. Elsewhere in airline-related news, Iberia was forced onto the market as an investment group prepared to make an offer to buy the company. Flybe became Europe’s largest regional carrier with the acquisition of British Airways subsidiary, BA Connect. In parallel with traffic growth, safety in air transport continues to improve. IATA reported European airline hull losses in 2006 at 0.32 losses per one million flights, just half the global accident rate, down 14% from 2005 statistics. Airport traffic reflected increased airline activity. ACI’s European airports posted a 6% increase for passengers in the first two months of 2007, above the worldwide growth at the organization’s airports (held back by relatively low growth at US airports). Traffic growth at major airports may be at the cost of on-time performance: AEA reports member airlines’ departures were delayed more often at Europe’s largest airports. The worst performer was Madrid where the average delay in 2006 was forty-six minutes, and 31% of departures suffered delay of over fifteen minutes. Among Europe’s largest airports, Dublin, Madrid and Milan Malpensa recorded gains in passenger traffic over 12%, but London Heathrow and Manchester suffered drops of around 2% over the two months. This fall at two of the UK’s airports could reflect the impact of threatened strike action by British Airways cabin-crew in January. Cranfield University: Quarterly Report Q1 2007 for DG TREN 2 2. Highlights and key developments 2.1 Regulatory The most significant development in this quarter was the draft aviation agreement on the EU-US bilateral reached on 2nd March following lengthy negotiations over the past four years. The tentative agreement reached in November 2005 was subject to a reform in the US's rules on airline ownership and control. Following the withdrawal of the planned US reform, a number of additional elements have been added to the earlier agreement to provide a better balance of interests. These include: an additional protocol on ownership, investment and control; the unilateral granting to the EU by the US of seventh-freedom passenger traffic rights to a number of non-EU countries; a number of access rights for Community carriers to the US Fly America programme; rights in respect of franchising and branding; and provisions on antitrust immunity. This first stage agreement was approved by the Council of Transport Ministers on 22nd March and will become effective on 30th March 2008. Negotiations on a second stage agreement will focus on: the further liberalisation of traffic rights; additional foreign investment opportunities; the effects of environmental measures and infrastructure constraints; further access to Government-funded air transport; and wet- leasing. If no stage 2 agreement has been reached within twelve months of the start of the review, any Member State may notify the Commission which traffic rights in relation to its own territory it wishes to suspend. In addition on 22nd March, the Council reached political agreement on a proposal for a Decision on the signature and provisional application of an agreement with Russia on Siberian overflights payments. The EU signed “horizontal” aviation agreements with Paraguay in February and with Malaysia in March removing nationality restrictions in the bilateral air services agreements between Member States and the two countries. Paraguay is the third Latin American country to have signed this type of agreement with the EU. On 7th March the Commission announced that it had found the restructuring plan for Cyprus Airways proposed by the Republic of Cyprus to be compatible with Community Law. On 24th January the Commission adopted a package of regulatory measures for airports consisting of three key initiatives: a proposal for a Directive on airport charges; a communication on airport capacity, efficiency and safety in Europe; and a report on the implementation of the ground handling Directive. The proposal on airport charges aims to redefine the relationship between airport operators and airport users by requiring complete transparency, consultation with users, and non- discrimination in the calculation of user charges. Each Member State will be required to establish a national independent regulatory authority to arbitrate and settle disputes in respect of these matters. The aim of the new measures is to create a common set of rules for airports that can be applied and uniformly enforced throughout Europe. In March the Commission produced its third update of the Community list of airlines banned from operating in the EU. Two carriers (Phuket Air and DAS Air Cargo) have been removed from the revised list after having rectified their previous serious safety deficiencies. A total of 49 airlines previously included in the list have been removed as a result of their ceasing to operate. New safety measures have been Cranfield University: Quarterly Report Q1 2007 for DG TREN 3 imposed on two carriers, Pakistan International Airlines (PIA) and Air West of Sudan. PIA is subject to an operational restriction that only permits the carrier to operate its Boeing 777 aircraft within the EU. In January