The Added Value of EU policy for Airline services and air passenger rights

Updated on 07 July 2014

Over the last three decades, the institutions of the European Union have played a crucial role in developing a functioning single market for air passenger services in Europe. Specific policies have been pursued at European level to open up the previously fragmented and largely protected national aviation markets which existed in the EU member states. In the process, they have helped to widen consumer choice, reduce some air fares and enhance the efficiency of the European economy as a whole.

Back in the 1980s, the airline sector was fragmented into a series of distinct, largely captive, domestic markets, each often dominated by a single state-owned national flag carrier. On cross-border routes within the Union, there was characteristically a duopoly of two carriers sharing lucrative routes between them. A complex pattern of bilateral agreements between member-state governments meant that passengers could usually only fly on routes listed in these agreements, often at relatively high prices. Moreover, passengers’ rights were largely constrained by different sets of national rules and approaches to consumer protection, and these were in turn largely unenforceable or ineffective in any cross-border context.

Starting in 1979, the directly-elected European Parliament played a key role in building political pressure on the European Commission to develop a meaningful policy in this field, and on the Council of Ministers to enact it. Several rulings of the European Court of Justice (ECJ) confirmed this process. As a result, starting in 1987, the Commission came forward with a series of legislative proposals designed to free up the air transport sector, as a key part of its pre-1992 programme to complete the European single market. The  path to adopting law in this field was helped by the 1992 Maastricht Treaty, which extended qualified majority voting (QMV) in the Council to air transport policy, and the ambition of that policy was in turn bolstered by the 1997 Amsterdam Treaty, which shared the Council’s legislative power in this field with the Parliament through co-decision.

Three successive packages of reforms in the air transport sector came into effect progressively in the period to 1997. They initially liberalised arrangements for established carriers on existing routes between member states, notably in respect of air fares, and then opened up access for new carriers on existing routes, allowed the establishment of completely new routes, and offered the possibility that a carrier from one member state might pick up passengers within a second member state, en route to a third. The concept of a national air carrier was replaced by that of a ‘Community air carrier’ – an entity which, once granted an operating licence in a member state, now enjoys rights to operate across the Union as a whole.

The cumulative effect of these changes was to create a single civil aviation market, in which any European air carrier can operate any service in and out of any airport (at which it can obtain a landing slot, if need be), at a price which it determines freely, in any member state of the Union or indeed the wider European Economic Area (EEA). The European Commission has summarised the effect of its various initiatives as follows: ‘The deregulation of the EU’s airline sector has allowed new low-cost airlines to emerge, driving down prices across the sector, increasing the regularity and range of direct flights, stimulating the development of regional airports, boosting tourism and business travel, and creating many new jobs’.

Benefits to the European economy

The economic benefits of the development of a single market for air transport in Europe can be measured in several ways, but some of the more striking statistics are as follows:

• There are now around 150 registered airlines within the European Union, operating over 4,000 civilian aircraft, and providing scheduled passenger air services to and from 400 airports, which are used in turn by almost 800 million passengers each year.
• The number of passenger kilometres flown within the EU has increased significantly – from 346 billion passenger kilometres in 1995 to 524 billion in 2010. The proportionate increase during this period (51 per cent) was higher than that for all other modes of transport, including motor cars (22 per cent).
• Airline traffic within the Union increased almost twice as rapidly in the decade from 1995 to 2004, as the most important changes were taking off, as it did in 1990-94 – with an increase of a third in the number of passenger journeys taking place.
• Since 1992, the number of intra-EU routes has more than doubled, increasing by 140 per cent (to 2010). There has also been a 150 per cent increase in long-haul flights departing from EU airports, partly as a result of the existence of more feeder routes, promoted by the intra-EU single market in this field.
• The average number of operators per route has also increased. In 1992, only 93 intra-European routes were covered by more than two airlines. By 2011, the number had risen to 482.
• The price of air transport services has risen less rapidly than that of other transport services within the Union in recent years. According to ICAO, between 1992 and 2000, ‘promotional fares’ – essentially those for non-fully flexible tickets – fell in real terms within the Union by some 30 per cent.
• The multiplier effect of air transport liberalisation – notably in promoting business travel and tourism – is estimated to have boosted EU gross domestic product (GDP) by as much as 4.0 per cent (according to studies by Eurocontrol and the Intervistas consulting group). The civil aviation sector itself now accounts for 1.5 per cent of EU GDP.
• The impact on employment has been significant. The first rounds of liberalisation are estimated (by Intervistas) to have created some 1.4 million full-time equivalent jobs in the period up to 2006. More than three million people are now employed in the civil aviation sector within the EU, many of them in highly skilled jobs.
• The number of airports in the Union with commercial airline operations has increased – especially smaller airports, away from national hubs, where there are no slot constraints – with generally positive effects for regional development.

Air passenger rights

The EU has underpinned the single market in air transport by establishing certain basic common rights for all passengers travelling within the Union. It has also standardised the requirements for civil aviation safety at the highest possible level.

1. Since 2005, there have been uniform rules for compensation and assistance to passengers if they are denied boarding or if their flights are cancelled or significantly delayed. These include:the right to reimbursement, re-routing and compensation for flight delays (of more than two hours, depending on the distance to be flown), cancellations and denied boarding (with special rules for compensation in exceptional circumstances). The level of compensation is between €250 and €600, depending on the delay and the distance to be flown;
2. the right to accurate, timely and accessible information: airlines are obliged to provide information on passenger rights and flight schedules;
3. the right to assistance: airlines are now required to offer refreshments, food and accommodation, as appropriate, to passengers awaiting re-routing. Passengers with disabilities or reduced mobility must receive appropriate assistance;
4. the right to compensation for lost or damaged baggage, up to about €1,200;
5. the right to price transparency, based on clear pricing, including taxes and charges;

This Regulation of the European Parliament and the Council is currently being updated, and the European Parliament adopted its First Reading in February 2014. The revision is designed to be a positive step forward, improving the rules and further strengthening the enforcement of passenger rights in respect of, inter alia, information to passengers, compensation and mishandled luggage; widening the concept of denied boarding, enabling voluntary agreements, and facilitating alternative (out-of-court)dispute resolution.

Download a PDF version of this At a glance.