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The European Union is a political and economic union comprising 27 states located primarily in Europe. The EU collectively represents the world's largest economy, with a GDP of USD15 trillion (2009), and counts some 500 million people within its borders. The EU operates as a single market, with a common system of laws and trade policies, with 16 states have forming a monetary union, adopting a common currency - the euro. The single market is based on the four freedoms of the EU: the free movement of labour, capital, goods and services. 22 member states have agreed to abolish passport controls between them, under an agreement known as the Schengen Agreement. Major institutions of the EU include the European Commission, the European Council, the European Parliament, the European Court of Justice and the European Central Bank.
The European Union was established in the aftermath of World War Two to bring peace, stability and prosperity to Europe. Key developments in its history include:
- 1951: The European Coal and Steel Community is established by the six founding members
- 1957: The Treaty of Rome establishes a common market
- 1973: The Community expands to nine member states and develops its common policies
- 1979: The first direct elections to the European Parliament
- 1981: The first Mediterranean enlargement
- 1993: Completion of the single market
- 1993: The Treaty of Maastricht establishes the European Union
- 1995: The EU expands to 15 members
- 2002: Euro notes and coins are introduced
- 2004: Ten more countries join the Union, establishment of the European Constitution
- 2007: Two more countries Join EU, member states sign Treaty of Lisbon.
- 2014: EU elects Jean-Claude Juncker as President for five-year term.
- 2015: Lithuania adopts the Euro as its currency, becoming 19th member of the euro area.
European Commission Vice-President, Siim Kallas, is responsible for Transport.
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Lufthansa, Singapore Airlines respond to Gulf competition with a limited JV. There is scope for more
The rise of the Gulf carriers continues to pressure airlines that were once formidable individual competitors into joining forces to combat a more effective rival. And so the Lufthansa and Singapore Airlines groups have been forced to compromise their previous independence. One new strategy is to form a revenue sharing joint venture. This method of cooperation is becoming more common between Europe and Asia, having already been established in the trans-Atlantic and trans-Pacific markets. Most JVs were established to enhance a position of strength built on pre-existing solid footing. In comparison, Lufthansa and SIA are setting aside differences in this time of duress to respond to the Gulf carriers that have changed their business profoundly.
Although Lufthansa and SIA account for about 27% of non-stop Western Europe-Southeast Asia capacity, their share of flown passengers is around 13%. Emirates alone has 12%; adding Etihad and Qatar now has 27% of the market transitting via the Gulf. But SIA and Lufthansa are the only airlines operating non-stop service between their respective countries.
Despite the severe situation, perhaps bordering on crisis, the response from Lufthansa and SIA is limited. Their JV will only cover routes from Singapore to Germany (the hub of Lufthansa) and Switzerland (the hub of Swiss). This is only one third of their Europe-Southeast Asia market. Lufthansa and SIA will remain competitors on many other market pairs - and this could become a source of friction, or at least suspicion. A Singapore-London passenger, for example, could go non-stop on SIA outside the JV or via a German/Swiss hub under a JV. Both airline groups will compete for a Kuala Lumpur-Amsterdam passenger.
The European Parliament has passed a resolution attempting to set out the assembly's views on how the European Union should develop and integrate its transport policies to form a genuine Single European Transport Area. It does not read easily.
The resolution notes that the transport sector employs around ten million people in the EU and accounts for 5% of GDP and describes it as "a frontrunner in generating further economic growth and job creation, and promoting competitiveness, sustainable development and territorial cohesion". It also trumpets Europe's position as a transport "world leader", in both manufacturing and operations, and stresses the importance of its maintaining its competitive position against "powerful new players and new business models".
Central aims of the resolution are to place people at the heart of transport policy and to honour greenhouse gas commitments across all modes. It supports European connectivity, the Single European Sky and liberalised aviation agreements with the BRICs and ASEAN. However, it may stir controversy with proposed changes to passenger rights regulations and what look like illiberal stances on Gulf/Turkish competition and "flags of convenience".
This CAPA report looks at the European Commission’s Investment Plan for Europe, which is also known as the European Fund for Strategic Investments (EFSI) and the ‘Juncker Plan’ after the EC President Jean-Claude Juncker, who instigated it in Nov-2014.
Its purpose is to unlock public and private investments into the "real economy" (which means the part[s] of the economy that are concerned with the production of goods and services, as opposed to the part that is concerned with buying and selling on financial markets.
Those investments are expected to total at least EUR315 billion (USD348 billion) over the three fiscal years Jan-2015 to Dec-2017.
Aviation in Europe has a PR problem, which is not helped by the fragmentation of industry representation. Efforts to consolidate representation have so far not yielded material results. Europe's five largest airlines are now attempting to seek common ground, prompted by the European Commission's consultation on a new aviation policy. However, they are avoiding obvious sticking points such as protectionism with regard to competition from Gulf-based airlines. By contrast, airport representation is unified in ACI Europe, which has also responded to the Commission with a liberal set of policy proposals.
Recent changes in the membership of Europe's main airline representative bodies have seen ELFAA become its biggest airline association, measured by its members' passenger numbers, ending the previous hegemony of AEA. IAG's legacy airlines defected from AEA to ELFAA due to differences of opinion over market liberalisation.
There has never been a greater need for a single voice on issues such as taxation and the infrastructure provision (both on the ground and in the air). Aviation needs to argue its case and more effectively promote its benefits to the public.
On 1-Jun-2015, Norwegian made another attempt at asking the US Department of Transportation (DOT) to allow its Irish-registered subsidiary, Norwegian Air International (NAI), to operate transatlantic routes under the EU-US open skies agreement. NAI's case, filed in Dec-2013 and completed in Feb-2014, has been pending for longer than any other such application.
To address its opponents' stated concerns that NAI is a "flag of convenience", whose only purpose is "social dumping", Norwegian now says that it will employ pilots and cabin crew only from Europe and the US. If there was a clear reason to deny the application, surely this would have been decided by now. Many informed parties, including the European Commission, the lead negotiators of the EU-US agreement, consumer and trade organisations and competitor airlines do not believe that there is such a reason.
Meanwhile the DOT has allowed itself to be hijacked by the anti-competitive agenda of the Big Three US airlines and a number of labour unions. In this report, we outline the arguments surrounding this case. In a second part, we will look at the impact of Norwegian's transatlantic operations on competitors' traffic share.
UK aviation policy may well be substantially changed in the wake of the 18-Sep-2014 vote on the independence of Scotland, even though Scotland remains part of the UK. In this report we speculate on some of the possible aviation outcomes.
Roughly 55% of the electorate voted against independence versus 45% for, although four of 32 areas did vote in favour, including the biggest city, Glasgow. But that decision has hardly settled the matter; indeed the process of electioneering has opened up a Pandora’s Box of issues that possibly threaten the 307 year old Union even more than Scottish independence alone would have done. As ever, aviation will be dragged into the melee.
One thing now apparent is that there are no longer any certainties and that the Airports Commission especially needs to be aware, at a critical moment in its deliberations, of the many new forces at play - and the potential new scenarios.