Tuesday, May 4, 2010

European Commission clears relief package for airlines

S Kalyana Ramanathan / London May 2, 2010

The European Commission (EC) has approved a relief package that its member states can announce in support of the airline industry. The move comes as carriers suffered huge financial losses after European aircraft were grounded as a safety measure when a volcano in Iceland erupted last month. The volcano belched large amounts of ash into the sky, which was deemed a hazard to aviation.

Apart from financial support, that will not be state aid, the commission has suggested medium-term structural measures like speedy implementation of a Single European Sky — an objective that is set to be in place by 2012. The EC asked its members not to provide any direct state aid to carriers but provide financial support by deferment of certain charges and flexibility in application of rules.

“The commission will not object to member state measures to waive operational restrictions for short periods — like flight restrictions — until the return to normality of the overall network and the repatriation of all stranded passengers. With regard to route charges, the commission will recommend to member states and to Eurocontrol to assess immediately the possibility of deferring the actual payments for en-route charges for a defined period of time. This is an important measure to provide some relief from immediate cash flow problems. Member states should take all appropriate steps in relation to their air navigation service providers,” the EC said in a statement.

The EC estimated the overall loss to the airline industry due to the volcanic ash crisis that lasted a week between April 15 and 21 at ¤2.5 billion. European Commission Vice-President (Transport) Siim Kallas said: “The European Union has been hit by an unprecedented crisis with the closure of airspace due to the volcanic eruption, leading to more than 100,000 cancelled flights and more than 10 million passengers unable to travel. Now, as we are getting back to normal, our focus can shift to relief measures for the industry. This is about practical measures to provide relief to the air transport sector so that it can weather this crisis. The commission is also proposing structural changes to ensure we do not face this situation again.”

Airlines industry body IATA welcomed EC’s relief package. “These urgent measures will provide a much needed assistance to airlines at a time when their financial resources are stretched,” IATA Director General and CEO Giovanni Bisignani said.

While the short-term financial measures will be implemented immediately, the medium-term solutions will be discussed at the transport ministers’ meeting in Brussels on May 4.

Single sky
Apart from short-term financial support, the EC has said that member states must accelerate their move towards a more integrated European sky. The Single European Sky package aims at redesigning the European sky according to traffic flows rather than national borders.

In particular, the single sky package would put in place a single European system for air traffic, which would co-ordinate the work of 27 national air traffic controllers, EC said. The commission is proposing to fast-track many elements of the Single European Sky package already by the end of 2010. In particular, the appointment of a European network manager before the end of 2010 is crucial.

If the network management function had been designated prior to the crisis, the situation would have been quite different. A more harmonised and co-ordinated approach to risk and flow/capacity assessment, and the ability to formulate quickly proposals for solutions are needed.

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