Airline Regulatory: New developments Following “Open Skies” Decisions

Author:Ms Sue Barham
Profession:Barlow Lyde & Gilbert

The decision of the European Court of Justice (ECJ) in the open skies cases (see BLG Aviation News Issue 11) have given the impetus to two proposals from the European Commission aimed at enhancing the application of European law and the powers of the Commission in the regulation of air transport.

In the open skies cases, which examined the legality of certain of the provisions in bilateral air service agreements (ASA's) between eight Member States and the US, the ECJ adjudged:

that the EU has competence in respect of air transport relations with third countries; and

that the nationality clauses in Member States' bilaterals infringed EU law as being contrary to those States' obligation to allow freedom of establishment to individuals or companies of other Member States.


The Commission proposes to end what it regards as the current inconsistency whereby it has jurisdiction in relation to an alliance of EU airlines but not over an alliance between an EU airline and a third country airline - a situation made more anomalous given the ECJ's finding that the EU has competence in respect of air transport relations with third countries. The proposed regulation (due to come into effect on 1 May 2004) therefore enables the Commission to examine EU/non-EU airline alliances and cooperation agreements and to apply enforcement powers in respect of any infringements of EU competition rules which such arrangements might occasion.

The Commission takes the view that, following the open skies judgment, there will be increased alliance, cooperation and merger and acquisition activity amongst airlines (presumably aided by decreased emphasis on nationality restrictions in bilaterals), making the application and enforcement of competition rules all the more important. Secondly, the Commission identifies an increasing need, following the ECJ's judgment, for a coherent, Europewide regime for the regulation of international air transport. Whilst there is a logic to discarding what is undoubtedly an inconsistency, it is questionable whether the first of these justifications is particularly well-founded. The Commission already has power to review mergers involving non-EU airlines under the EC Merger Regulation (4046/89). To date, nationality restrictions in bilaterals have tended to force airlines down the route of alliances; however the removal of those constraints may increase the prospect of...

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