FAQ on EU-Canada Aviation Agreement

December 10, 2008 // Published as a news service by IHS

Why is there a need for such an agreement?
Europe and Canada are close international partners, with strong economic, cultural and political ties. However, arrangements for air transport do not reflect this reality, with Canada having restrictive or no agreements on aviation with the vast majority of EU member states.

The new agreement transforms this important market for European and Canadian consumers and airlines. It also brings legal certainty to operations between the EU and Canada by recognizing the principles of the EU internal aviation market and of a European Community carrier.

What changes can passengers and industry expect from the agreement?
In 2007, nine million people were traveling between the EU and Canada. A study launched by the European Commission (EC) suggested that an open agreement would generate an additional one-half million passengers in its first year.

After a few years, 3.5 million additional passengers are expected to make use of the opportunities of an open aviation area between the two partners. The agreement gives additional freedom for airlines, including access to new markets, full pricing freedom and an improved way of regulating the industry.

An increase in direct flights between the EU and Canada is also expected, as well as more competition and lower prices.

What are the new rights for EU airlines?

• The possibility for any "Community air carrier" to fly between any point in the EU to any point in Canada, without any restrictions on the number of flights. This freedom did not exist before.
• Freedom to enter into commercial arrangements with other airlines - that is, code-share agreements^[1], which are important for airlines when serving a large number of destinations, and no restrictions for airlines to establish their tariffs in line with competition law.
• Provisions for a phased market opening linked to the granting of greater investment freedom by both sides:
• Phase 1 takes effect from the start. Airlines will have unlimited freedom to operate direct services between any point in Europe and any point in Canada. There will no longer be limitations on the number of airlines flying between the EU and Canada, or on the number of services operated by any airline. Cargo airlines will have the right to fly onward to third countries.
• Phase 2 starts as soon as Canada takes the steps necessary to enable European investors to own up to 49% of a Canadian carrier's voting equity (up from 25% now). Then further traffic rights will be granted, including the right for cargo to operate services to third countries from the other party to third countries without connection to their point of origin.
• Phase 3 begins once both sides enable investors to set up and control new airlines in each other's markets. Then passenger airlines will be able to fly onward to third countries.
• Phase 4 is the final step with full rights to operate between, within and beyond both markets, including between points in the territory of the other party (cabotage). It will be granted once both sides complete steps to allow the full ownership and control of their carriers by the other's nationals.

How will the EU and Canada cooperate on regulatory issues?
The agreement deals with regulatory issues in order to give greater opportunities to airlines in areas where Canada, in the past, was very restrictive - such as tariff control, pricing, statistics or operating conditions. Airlines can now freely set their tariffs in line with competition law.

In the field of aviation safety and security, Canada and the EU are moving towards mutual recognition and one-stop security. This means that both partners would finally recognize the high level of their respective security and safety systems, and avoid double-checks by authorities.

The agreement provides for a strong mechanism for the application of a non-discriminatory competitive framework. It ensures that airlines cannot be discriminated against in terms of access to infrastructure or state subsidies. This would be a novelty in such international aviation agreements.

Another groundbreaking element is the provision on environment, which establishes close cooperation between the parties to mitigate the effects of aviation emissions - notably on climate change.

What rules were applicable for EU-Canada services until now?
Despite a close network of bilateral aviation arrangements, eight member states^[2] do not yet have an agreement with Canada. Furthermore, many existing agreements are old and do not offer full access to the respective markets.

In some agreements, even the number of weekly flights is restricted, and prices are controlled. Existing bilateral agreements between member states and Canada will be replaced by the new EU agreement.

What are the economic benefits of the agreement?
The agreement will directly contribute to further develop the EU-Canada transatlantic trade. Aviation is crucial for bringing Canada and the EU closer together to facilitate the flow of people and valuable goods. The opening of aviation markets could bring economic benefits of at least €72 million and more than 1,000 jobs in the first year.

How is the implementation of the agreement being monitored?
The agreement establishes a new governance mechanism: the EU-Canada Joint Committee. It will oversee the implementation of the agreement, including the facilitation of close regulatory cooperation. In particular, this committee will:

• Confirm the move to a next phase of implementation.
• Discuss important operational issues and market developments.
• Ensure the non-discriminatory treatment of operators.
• Make proposals to further develop the agreement.
• Discuss other issues of bilateral or international importance.
• Make decisions where provided for in the agreement.

When will the agreement become effective?
The rights under the new agreement will become applicable as from the date of signature, which is expected to take place in the first half of 2009.

^[1] These code-share agreements allow use of the code-share partner's flight designator code to identify flights and fares in computer reservation systems, permit use of logos, service marks, aircraft paint schemes and uniforms similar to those of the code-share partner and provide coordinated schedules and joint advertising.

^[2] Cyprus, Estonia, Latvia, Lithuania, Luxembourg, Malta, Slovakia and Slovenia do not have bilateral air transport agreements with Canada.

Source: European Commission.