AIR TRANSPORT: QUARTERLY REPORT NO.15 2Nd QUARTER 2007 (April to June)
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The unique Barra Beach Airport is here being served by this Loganair DHC-6 Twin Otter in compliance with a Public Service Obligation. AIR TRANSPORT: QUARTERLY REPORT NO.15 2nd QUARTER 2007 (April to June) 1 OVERVIEW..................................................................................................................................2 2. HIGHLIGHTS AND KEY DEVELOPMENTS.........................................................................3 2.1 REGULATORY.........................................................................................................................3 2.2 AIRLINES................................................................................................................................4 2.3 AIRPORTS.............................................................................................................................11 2.4 SAFETY AND SECURITY ........................................................................................................14 2.5 ATM....................................................................................................................................14 2.6 MANUFACTURERS ................................................................................................................15 2.7 THE ENVIRONMENT ..............................................................................................................16 3 PUBLIC SERVICE OBLIGATIONS .......................................................................................17 3.1 USE OF THE PSO ..................................................................................................................17 3.2 CONDITIONS IMPOSED ..........................................................................................................20 3.3 FARES CHARGED ON PSO ROUTES........................................................................................20 3.4 PSO TENDERING PROCESS ....................................................................................................21 3.5 TYPES OF AIRCRAFT USED ON EU PSOS...............................................................................23 3.6 LEVELS OF SUBVENTION.......................................................................................................25 3.7 ENFORCEMENT OF PSO RULES .............................................................................................25 3.8 THE COMMISSION'S PROPOSAL TO REVISE THE THIRD AVIATION PACKAGE ..........................26 Cranfield University: Quarterly Report Q2 2007 for DG TREN 1 1 Overview An event with likely far-reaching consequences for the development of transatlantic air services, and eventual consolidation in the industry, took place with the signing of the EU US aviation treaty in April. The first stage becomes effective in March next year, and allows any EU or US airline to provide air services between any EU city and any city in the US Also in April, guidance on the interpretation and implementation of the process of imposing public service obligations on routes was delivered by the EC. This followed an investigation which came about because two low-cost carriers complained that onerous conditions imposed by the Italian authorities effectively excluded the airlines from the selection process for routes between mainland Italy and Sardinia. Section 3 of this report examines in some detail the way PSO routes are administered. PSO routes apart, LCCs continued to develop their networks, with the arrival of summer schedules including 440 new routes announced by thirty airlines. While most of these routes will be successful, a number will be dropped. This is a manifestation of the ease with which airlines can enter and depart markets, creating a measure of volatility which saw in the twelve months to June 2007, over 340 point-to-point city- pairs lost to the European network, to be replaced by some 640 new city-pairs. AEA airlines reported passenger traffic up by 4.5% overall in the three months to end June 2007. Average load factors were up in all regions except the North Atlantic, where capacity growth outstripped increases in demand (RPK). Of major European carriers, Air France and Lufthansa both saw solid increases in capacity on their passenger services coupled with load-factor growth of around two percentage points. Q1 covers a quiet period, particularly so when, as in 2007, it does not include Easter. However, airline financial results were generally good, reflecting the traffic results above. Air France and Lufthansa were both ahead, while British Airways fell back to join Alitalia, Austrian and SAS in posting negative net results. Finnair, Iberia, Swiss and Turkish all reported positive results, with Swiss performing particularly well. Among LCCs, Ryanair was in positive territory while Vueling and Air Berlin recorded negative operating margins. Ryanair’s takeover of Aer Lingus was blocked because of concerns that Irish consumers, in particular, would suffer if the country’s two largest carriers merged, while Aeroflot quit the race to acquire a stake in Alitalia. ACI’s forty-five European airports were up 6% in passenger throughput in April, against a 5% increase in the association’s world-wide airports. January to April growth in passenger traffic among the largest European airports was particularly strong at Dublin, Madrid, Milan Malpensa and Munich, fuelled to some extent by the activity of LCCs but also by new airport capacity coming online. Growth in traffic did not lead to a deterioration in flight delays, as AEA airlines reported year-on-year improvements in key measures of on-time performance at the majority of the largest airports. Cranfield University: Quarterly Report Q2 2007 for DG TREN 2 2. Highlights and key developments 2.1 Regulatory In Washington on 30th April Jacques Barrot, Vice-President of the Commission, signed the first-ever aviation treaty between the EU and US, the first stage of which will come into force on 30th March 2008. A strictly defined timescale for the second stage of the new treaty and a list of priority items have already been agreed. Signs of the impact of the new bilateral are already apparent, with further changes in the supply of transatlantic air services widely anticipated. In June the EU signed a “horizontal” aviation agreement with the Kyrgyz Republic removing nationality restrictions in the bilateral air services agreements with Member States. In all, twenty-seven such agreements have now been established, which together with changes agreed by individual Member States has brought some 500 bilaterals into conformity with European law. In April the Commission authorized public service obligations on sixteen air routes linking Sardinia to the Italian mainland, following a formal investigation initiated in August 2006 into the PSOs imposed by Italy on these routes (IP/07/539). The Commission did not question the principle of imposing PSOs on the routes in question. However, their application is authorized only if several conditions imposed by the decrees governing them are revoked or amended. In particular, the first stage of the PSOs must remain open to any operator that complies with them; the time period chosen to ensure continuity of services must be reasonable and not exceed one year; the authorities must not prevent airlines from providing services on the routes concerned that go beyond the minimum requirements; the authorities cannot make the right of an air carrier to provide services on one route conditional upon the obligation to provide services on another route; and the need to maintain PSOs and the extent of the obligations on each of the 16 routes should be reassessed at least once a year and each time a new carrier starts operating or notifies its intention to operate on one of the routes. The Italian authorities are required to notify the Commission of the measures taken to implement the decision no later than 1st August. The investigation was prompted by complaints from easyJet and Ryanair, both of whom had been prevented from operating specific Italian domestic routes as a consequence of the PSOs being imposed. The consultation process to examine the possible revision of Regulation 2299/89 which establishes a Code of Conduct for computerised reservation systems (CRS) closed on 27 April. The consultation paper gives an overview of the most recent market developments and invites all interested parties to provide their views and comments on the raised questions in order to assess the need for revision of Regulation 2299/89. In April the Commission decided to delay the introduction of rules on maximum cabin baggage size until May 2008 in order to reassess their advantages and disadvantages particularly in respect of security and passengers’ comfort. The rulemaking, adopted as part of the review of EC Regulation 1546/2006, sought to limit the maximum size of cabin bags to 56cm x 45cm x 25cm. Cranfield University: Quarterly Report Q2 2007 for DG TREN 3 In April the Commission announced that it was giving airlines and Member States another six months to make Regulation (EC) 261/2004 dealing with air passenger rights work effectively. There are two main reasons why there have been difficulties in implementation, namely: the use of imprecise text in sections of the regulation and ineffective enforcement in some Member States. For example in the case of the former, passengers and airlines are sometimes unable to distinguish between a cancelled flight and one subject to a long delay. An example of the