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Aviation Strategy for Europe

Aviation: EU and ASEAN conclude the world's first bloc-to-bloc Air Transport Agreement

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The European Union and the Association of Southeast Asian Nations (ASEAN) have concluded negotiations on the ASEAN-EU Comprehensive Air Transport Agreement (AE CATA). This is the world's first bloc-to-bloc air transport agreement, which will bolster connectivity and economic development among the 37 member states of ASEAN and the EU. Under the agreement, EU airlines will be able to fly up to 14 weekly passenger services, and any number of cargo services, via and beyond any ASEAN country, and vice versa. 

Transport Commissioner Adina Vălean said: “The conclusion of this first-ever ‘bloc-to-bloc' air transport agreement marks an important milestone in the EU's external aviation policy. It provides essential guarantees of fair competition for our European airlines and industry, while strengthening reciprocal prospects for trade and investment in some of the world's most dynamic markets. Importantly, this new agreement also provides us with a solid platform to continue promoting the high standards on safety, security, air traffic management, environment and social matters going forward. I am grateful for the constructive approach of all parties involved, which made this historic deal possible.” 

The Agreement will help rebuild air connectivity between ASEAN countries and Europe, which has decreased sharply due to the COVID-19 pandemic, and open up new growth opportunities for the aviation industry in both regions. Both parties expressed intent to maintain regular discussions and close coordination to minimise disruptions to air services caused by the pandemic. ASEAN and the EU will now submit the AE CATA for legal scrubbing in preparation for signature at a later date. A joint statement on the Conclusion of the ASEAN-EU Comprehensive Air Transport Agreement (AE CATA) has been published here

Aviation Strategy for Europe

Commission approves €26 million Irish aid scheme to compensate airport operators in context of coronavirus outbreak

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The European Commission has approved, under EU state aid rules, a €26 million Irish aid scheme to compensate airport operators for the losses caused by the coronavirus outbreak and the travel restrictions imposed by Ireland to limit the spread of the coronavirus. The aid consists of three measures: (i) a damage compensation measure; (ii) an aid measure to support the airport operators up to a maximum of €1.8 million per beneficiary; and (iii) an aid measure to support the uncovered fixed costs of these companies.

The aid will take the form of direct grants. In case of support for the uncovered fixed costs, aid can also be granted in the form of guarantees and loans. The damage compensation measure will be open to operators of Irish airports that handled more than 1 million passengers in 2019. Under this measure, these operators can be compensated for the net losses suffered during the period between 1 April and 30 June 2020 as a result of the restrictive measures implemented by the Irish authorities in order to contain the spread of coronavirus.

The Commission assessed the first measure under Article 107(2)(b) of the Treaty on the Functioning of the European Union and found that it will provide compensation for damage that is directly linked to the coronavirus outbreak. It also found that the measure is proportionate, as the compensation does not exceed what is necessary to make good the damage. With regard to the other two measures, the Commission found that they are in line with the conditions set out in the state aid Temporary Framework. In particular, the aid (i) will be granted no later than 31 December 2021 and (ii) will not exceed €1.8 million per beneficiary under the second measure and will not exceed €10 million per beneficiary under the third measure.

The Commission concluded that both measures are necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a member state, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework. On this basis, the Commission approved the three measures under EU State aid rules. More information on the Temporary Framework and other actions taken by the Commission to address the economic impact of the coronavirus pandemic can be found here. The non-confidential version of the decision will be made available under the case number SA.59709 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved.

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Aviation Strategy for Europe

Aviation: Commission proposal on airport slots offers much-needed relief to sector

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The European Commission has adopted a new proposal on slot allocation that grants aviation stakeholders much-needed relief from airport slot use requirements for the summer 2021 scheduling season. While airlines normally have to use 80% of the slots awarded to them to secure their full slot portfolios for subsequent scheduling seasons, the proposal reduces this threshold to 40%. It also introduces a number of conditions aimed at ensuring airport capacity is used efficiently and without harming competition during the COVID-19 recovery period.

Transport Commissioner Adina Vălean said: “With today's proposal we seek to strike a balance between the need to provide relief to airlines, which continue to suffer from the significant drop in air travel due to the ongoing pandemic and the need to maintain competition in the market, ensure an efficient operation of airports, and avoid ghost flights. The proposed rules provide certainty for the summer season 2021 and ensure that the Commission can modulate further necessary slot waivers according to clear conditions to ensure this balance is maintained.”

Looking at the traffic forecasts for summer 2021, it is reasonable to expect that traffic levels will be at least 50% of 2019 levels. A threshold of 40% will therefore guarantee a certain level of service, while still allowing airlines a buffer in the use of their slots. The proposal on slot allocation has been transmitted to the European Parliament and Council for approval.

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Aviation Strategy for Europe

Boeing subsidy case: World Trade Organization confirms EU right to retaliate against $4 billion of US imports

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The World Trade Organization (WTO) has allowed the EU to raise tariffs up to $4 billion worth of imports from the US as a countermeasure for illegal subsides to the American aircraft maker, Boeing. The decision builds upon the WTO's earlier findings recognizing the US subsidies to Boeing as illegal under the WTO law.

An Economy that Works for People Executive Vice President and Trade Commissioner Valdis Dombrovskis (pictured) said: “This long-awaited decision allows the European Union to impose tariffs on American products entering Europe. I would much prefer not to do so - additional duties are not in the economic interest of either side, particularly as we strive to recover from the COVID-19 recession. I have been engaging with my American counterpart, Ambassador Lighthizer, and it is my hope that the US will now drop the tariffs imposed on EU exports last year. This would generate positive momentum both economically and politically, and help us to find common ground in other key areas. The EU will continue to vigorously pursue this outcome. If it does not happen, we will be forced to exercise our rights and impose similar tariffs. While we are fully prepared for this possibility, we will do so reluctantly.”

In October last year, following a similar WTO decision in a parallel case on Airbus subsidies, the US imposed retaliatory duties that affect EU exports worth $7.5bn. These duties are still in place today, despite the decisive steps taken by France and Spain in July this year to follow suit Germany and the UK in ensuring that they fully comply with an earlier WTO decision on subsidies to Airbus.

Under the current economic circumstances, it is in the mutual interest of the EU and the US to discontinue damaging tariffs that unnecessarily burden our industrial and agricultural sectors.

The EU has made specific proposals to reach a negotiated outcome to the long running transatlantic civil aircraft disputes, the longest in the history of the WTO. It remains open to work with the US to agree a fair and balanced settlement, as well as on future disciplines for subsidies in the civil aircraft sector.

While engaging with the US, the European Commission is also taking appropriate steps and involving EU member states so that it can use its retaliation rights in case there is no prospect of bringing the dispute to a mutually beneficial solution. This contingency planning includes finalizing the list of products that would become subject to EU additional tariffs.

Background

In March 2019, the Appellate Body, the highest WTO instance, confirmed that the U.S. had not taken appropriate action to comply with WTO rules on subsidies, despite the previous rulings. Instead, it continued its illegal support of its aircraft manufacturer Boeing to the detriment of Airbus, the European aerospace industry and its many workers. In its ruling, the Appellate Body:

  • Confirmed the Washington State tax programme continues to be a central part of the S. unlawful subsidization of Boeing;
  • found that a number of ongoing instruments, including certain NASA and U.S. Department of Defence procurement contracts constitute subsidies that may cause economic harm to Airbus, and;
  • confirmed that Boeing continues to benefit from an illegal U.S. tax concession that supports exports (the Foreign Sales Corporation and Extraterritorial Income Exclusion).

The decision confirming the EU right to retaliate stems directly from that previous decision.

In a parallel case on Airbus, the WTO allowed the United States in October 2019 to take countermeasures against European exports worth up to $7.5bn. This award was based on an Appellate Body decision of 2018 that had found that the EU and its Member States had not fully complied with the previous WTO rulings with regard to Repayable Launch Investment for the A350 and A380 programmes. The US imposed these additional tariffs on 18 October 2019. The EU member states concerned have taken in the meantime all necessary steps to ensure full compliance.

More information

WTO Appellate Body ruling on US subsidies to Boeing

Public consultation on preliminary list of products in the Boeing case

Preliminary list of products

History of Boeing case

History of Airbus case

 

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