FAQ on EU's New Framework for Air Services

October 31, 2008 // Published as a news service by IHS

This document answers frequently asked questions about the new regulation, which promises improved air traffic safety and price transparency.

1. How does the regulation improve consumer protection?
The new regulation provides for non-discriminatory and transparent pricing of air services.

It bans price discrimination on the basis of the place of residence or the nationality of the customer or the place of establishment of the travel agent.

In practical terms, this means that for the same product - the same seat on the same flight booked at the same moment - there should be no price differences based on the place of residence or the nationality of the passenger.

In the past, such differences have often been observed on airlines' web sites where residents of one member state had to book on the country-specific web site of the airline and where prices could be different (the place of residence of the passenger was established via the consumer's credit card number).

Price transparency is improved by clarifying that the final price includes all applicable fares, charges, taxes and fees. It prevents airlines from misleading consumers by advertising prices exclusive of taxes, charges and fees that are only added at the moment of booking.

The breakdown between air fares, taxes, airport charges, other charges, surcharges and fees will also be specified. Optional price supplements will be communicated in a clear, transparent and unambiguous way at the start of any booking process and their acceptance by the customer shall be on an "opt-in" basis.

2. What is an operating license?
While the Air Operator Certificate (AOC) certifies the technical capacity of an undertaking to safely provide air services, the operating license confers the right to provide commercial air services. Hence, while the AOC is basically a safety document, the operating license is an economic document.

The AOC is a prerequisite for obtaining an operating license. An air undertaking that has been granted an operating license by a member state in accordance with European Community law is considered to be a community air carrier and is entitled to provide air services throughout the EU, in and between all the member states.

From now on, it will be the same member state whose authorities grant the AOC and the operating license.

3. How does the new legislation impose a more stringent control over operating licenses?
The regulation does not foresee a centralized European supervision of operating licenses. EU member states remain responsible for the granting of the operating licenses.

However, in order to avoid divergent strictness in the application of European Community law with regard to operating licenses, the regulation obliges member states to suspend or revoke the operating license of an air carrier that no longer fulfills the requirements of the EU regulation.

Furthermore, in order to reduce the bankruptcy rates of new air carriers, the regulation foresees better financial information to be provided to the competent licensing authorities of the member states and obliges them to regularly check that the air carriers fulfill the requirements of EU law.

Thus, if an air carrier can no longer meet its actual and potential obligations for a 12-month period, the authority shall suspend or revoke the operating license. Pending a financial reorganization, and provided that safety is not at risk, the authority may grant a temporary license, not exceeding 12 months.

4. Are there any restrictions between member states?
The new regulation abolishes the last restrictions existing in bilateral agreements between member states for intra-community services. It clearly states that "Community air carriers shall be entitled to operate intra-community air services."

5. Does the regulation change the rules with regard to the leasing of aircraft?
Thanks to the harmonization of safety standards in the EU, the rules for the leasing of aircraft registered in the EU can now be relaxed. In particular, community air carriers can freely operate wet-leased (leasing with crew) aircraft registered within the community, except where this would endanger safety.

However, to take account of safety and social considerations, the regulation introduces clear and stringent rules on the leasing of aircraft registered in third countries, especially in the case of wet leasing.

6. Does the regulation change the rules with regard to public service obligations?
The regulation recognizes the need to maintain the possibility to recourse to a public service obligation (PSO) when the economic development of a remote region or an island depends on it.

The basic principles with regard to PSOs are unchanged in comparison with the present legislation, but the text has been clarified and adapted in order to allow a more efficient application.

For example, the maximum concession period when the route is being restricted to one single operator (after a call for tender) has been increased from three to four years (and even five years for ultra-peripheral regions).

This will allow attracting more competitors to the calls for tenders, given that depreciation costs of route-specific equipment will be reduced. At the same time, the longer concession periods reduce the administrative burden on the member states.

The regulation also foresees in the possibility of an emergency procedure to designate an alternative airline in situations of failure of the airline servicing the PSO route.

While recognizing the importance of PSOs, the regulation also wants to avoid abuse of the PSO system. Therefore, it explicitly states the necessity of respecting the proportionality between the obligations imposed and the economic development goals pursued.

Furthermore, in case of doubt, it confers the right to the EC to request a detailed economic report from the member state concerned justifying the need for the PSO.

7. How does a traffic distribution system between airports work in practice?
A member state may regulate the distribution of air traffic between airports provided that:

• They serve the same city or conurbation.
• They are served by adequate transport infrastructure, providing, to the extent possible, a direct connection that makes it possible to arrive at the airport within 90 minutes, including, when necessary, on a cross-border basis.
• They are linked to one another and to the city or conurbation they serve by frequent, reliable and efficient public transport services.
• They offer necessary services to air carriers and do not unduly prejudice their commercial opportunities.

8. Does the regulation have consequences for relations with third countries?
The regulation recalls that, notwithstanding the provisions of bilateral agreements between member states, community air carriers shall be permitted to combine air services and to enter into code-share arrangements with any air carrier, including third country air carriers, on air services to, from or via any airport in their territory from or to any point in the third country.

In some cases, in particular if a third-country does not allow similar commercial opportunities to community air carriers, a member state concerned may impose restrictions on the code-share arrangements between community air carriers and air carriers of the third-country concerned.

Such potential restrictions cannot, however, restrict competition and must be non-discriminatory between community air carriers.

For more information, see IP/08/1603.

Source: European Commission.