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Impact Assessment on the Proposal on Safeguarding Competition in Air Transport, Repealing Regulation

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Impact Assessment on the Proposal on Safeguarding Competition in Air Transport, Repealing Regulation EUROPEAN COMMISSION Brussels, 8.6.2017 SWD(2017) 182 final COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on safeguarding competition in air transport, repealing Regulation (EC) N° 868/2004 {COM(2017) 289 final} {SWD(2017) 183 final} EN EN Table of Content 1. General context ............................................................................................................ 7 1.1. EU aviation sector today .............................................................................................. 7 1.2. Legal context ................................................................................................................ 7 1.2.1. Regulation of international air transport ...................................................................... 7 1.2.2. Internal EU air transport market .................................................................................. 8 1.2.3. External dimension..................................................................................................... 10 1.3. Economic context ....................................................................................................... 11 1.4. Political context .......................................................................................................... 13 2. Problem definition ...................................................................................................... 14 2.1. Description of the main problem ................................................................................ 14 2.1.1. Competitive position of EU aviation globally ........................................................... 14 2.1.2. Competitive advantages of third country carriers ...................................................... 15 2.1.3. Competitive disadvantages of EU carriers ................................................................. 18 2.1.4. Concerns about the existence of subsidies and other practices seen as distorting competition to the detriment of EU carriers ............................................................... 21 2.1.5. Allegations regarding subsidies and other practices seen as distorting competition to the detriment of EU carriers ....................................................................................... 24 2.1.6. Impact of the alleged practices on EU air transport market ....................................... 29 2.1.7. Legal instruments for protection of competition in other sectors and countries ........ 31 2.1.8. Ineffectiveness of Regulation 868/2004 ..................................................................... 34 2.2. Underlying drivers of the problem ............................................................................. 36 2.2.1. Lack of proper mechanism for protection of fair competition in international aviation .................................................................................................................................... 37 2.2.1.1. Non-existence of international global trade agreements applicable to the international air transport services sector ........................................................................................ 37 2.2.1.2. ICAO rules do not currently address the issue of fair competition in the international air transport sector ...................................................................................................... 38 2.2.1.3. Bilateral Air Service Agreements between EU Member States and third countries do not effectively guarantee protection for EU air carriers against unfair practices ...... 41 2.2.1.4. Lack of access to information about the support received and financial accounts of third countries air carriers .......................................................................................... 42 2.3. Does the EU have the right to act? Legal basis and subsidiarity ............................... 43 3. Objectives ................................................................................................................... 44 3.1. Policy options ............................................................................................................. 45 3.2. Baseline scenario (how would the problem evolve, all things being equal) .............. 45 3.3. Discarded policy options ............................................................................................ 48 EN 2 EN 3.3.1. Improved functioning of the current Regulation (EC) No 868/2004 through a limited revision and the adoption of interpretative guidelines .............................................. 48 3.4. Considered policy options .......................................................................................... 49 3.4.1. Policy option A: Baseline scenario ............................................................................ 49 3.4.2. Policy option B: Increased international efforts at WTO and ICAO level aimed at the adoption of a multilateral legal framework for fair competition in aviation and inclusion of expanded fair competition clauses in ASA ensuring protection for EU air carriers against unfair practices (non-regulatory option)......................................... 49 3.4.3. Policy option C: Major changes to the regime contained in Regulation 868/2004 which would be repealed and replaced by a new comprehensive and effective EU legal instrument (regulatory option) .......................................................................... 52 3.4.4. Policy option D: Adoption of a new comprehensive EU legal instrument combined with increased efforts on the international scene and work on enhancing ASAs through inclusion of fair competition clauses ............................................................ 55 3.4.5. Summary of all considered options ............................................................................ 57 4. Analysis of impacts .................................................................................................... 58 4.1. Economic impacts ...................................................................................................... 58 4.1.1. Functioning of the internal market and competition.................................................. 58 4.1.2. Competitiveness, trade and investment flows............................................................. 61 4.1.3. Small and Medium Enterprises (SMEs) ..................................................................... 63 4.1.4. Cost of implementation .............................................................................................. 63 4.1.5. Consumers and households ........................................................................................ 65 4.2. Social impacts ............................................................................................................ 66 4.3. Environmental impacts............................................................................................... 66 5. Comparing the options ............................................................................................... 68 5.1. Effectiveness .............................................................................................................. 68 5.2. Efficiency ................................................................................................................... 69 5.3. Coherence ................................................................................................................... 69 5.4. Proportionality............................................................................................................ 70 5.5. Conclusion.................................................................................................................. 70 6. Monitoring and evaluation ......................................................................................... 70 Annex A – Procedural information and summary of amendments .......................................... 72 Annex B – Stakeholder consultation ........................................................................................ 79 Annex C – Affected parties and key interests .......................................................................... 99 Annex D – Environmental impacts ........................................................................................ 100 Annex E – Market trends in Europe and other regions .......................................................... 102 EN 3 EN ABBREVIATIONS ASA Air Services Agreement ASK Available Seat Kilometre ATM Air Traffic Management ATC Air Traffic Control CAGR Compound Aggregated Growth Rate CRS Computer Reservation System CAA Common Aviation Area DOT (US) Department of Transportation EEA European Economic Area ETS Emission Trading Scheme GATT General Agreement on Tariffs and Trade GATS General Agreement on Trade in Services IATA International Air Transport Association IATFCPA International Air Transportation Fair Competitive Practices Act ICAO International Civil Aviation Organisation JC Joint Committee MFN Most Favoured Nation MoU Memorandum of Understanding NT National Treatment RPK Revenue Passenger Kilometre SARPS Standards or Recommend Practices TBR Trade Barriers Regulation WTO World Trade Organisation EN 4 EN GLOSSARY OF TERMS Air Service Any scheduled air service performed by aircraft for the public transport of passengers, mail or cargo (Article 96 of the Chicago Convention) Air Services Agreement A treaty
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