Open Sky: Flights without Limitations - expert's comment

Commentary on the forthcoming EU-Ukraine Common Aviation Area Agreement

Natalia Sysenko, Research Fellow of the Institute for Economic Research and Policy Consulting

List of the EU-Ukraine Association Agenda priorities for 2010 incudes finalization of a comprehensive Common Aviation Area (CAA) Agreement. In this paper we try understand what CAA is and what it means for the EU and Ukraine.

The CAA is the single air transport market, based on a set of rules, common for all participants. CAA, encompassing 60 countries in the region with approximately 1 billion inhabitants, is a main goal of the EU’s external aviation policy. More "modest" target for 2010 the EU faces is to agree on a CAA with the Neighbouring Countries, including, of course, Ukraine. Now, all the EU Member States, Norway, Iceland, Liechtenstein, Switzerland, 6 countries of the Western Balkans, and Morocco participate in the CAA. One can fly within the CAA without any limitations in route, frequency and number of carriers. 

The CAA is positively considered by the EU authorities since it ensures more intensive development of the EU’s aviation sector and growth of traffic of passengers, who can fly without limitations. However, “opening-up of the skies” implies that any country-participant cannot act in isolation when pursuing its goals in aviation policy, but is a subject of common interest of the EU.

Thus, the EU occupies a position of great importance on the European market as it is able to face global challenges and to ensure rapid sector development. Means it uses to do so is regulatory framework elaborated within the EU. That’s why it strives for expansion of its experience across the Neighbouring Countries, “opening” their and its own sky. Though, official goals named are i) ensuring level playing field on the single market; ii) strengthening of the safety and security on a pan-European level; iii) the modernization of regulatory framework, in particular of air traffic management (ATM); iv) the tackling of climate change.

Before the EU become the only subject of external aviation policy in 2002, Ukraine had linked through bilateral air services agreements with all EU Member States. On December 1, 2005 the signature of the horizontal agreement between the EU and Ukraine, which became effective on October 13, 2006, took place. Though, it preserved negotiated bilateral agreements to a great extent. They imply different conditions for air carriers, and this, on the point of the EU’s view, distorts patterns of traffic and disadvantages several carriers and consumers in the EU. However, Ukraine remains a rather large air transport market, which had demonstrated high growth rates prior world economic crisis and has shown revival this year, what is a very attractive feature for European air carriers. Therefore, yet in December 2006 the European Commission was given a mandate to negotiate with Ukraine on CAA. And in December 2007 the first round of negotiations started.

On the view of Ukraine, it possesses not only large market, where 32 domestic companies operate, but also a broad airports infrastructure and aircraft building industry. This reveals ambitions of Ukraine to be an equal partner of the EU in negotiations on CAA. However, Ukraine’s position is weakened by the fact that national regulatory framework in the field of aviation has been out-of-date for so long and has not ensured adequate safety and security. Besides, airports infrastructure and air fleet are obsolete. Therefore, to “open-up its sky” Ukraine should i) remove infrastructure bottlenecks; ii) modernize the aviation industry according to Western standards; iii) fully implement European safety requirements; iv) modernize ATM procedures and aeronautical systems; v) improve technical standards of aircraft (renovate air fleet). Not achieving such goals, Ukraine risks not to benefit from “open sky”, i.e. not to enjoy tougher competition on the market (meaning lower air transport tariffs and higher services quality), higher safety and security standards, developed regional airports, increased orders for domestic aircraft. Instead, domestic companies can find themselves in new regulatory and business environment, where they quickly lose in competitive struggle with European companies, though consumers, both Ukrainian and European, should win given any scenario.

European Commission proposes to accelerate the bilateral negotiation process, but it is unlikely that an objective will be achieved before 2010. 5 negotiations rounds have already taken place. The sixth round agenda includes elaboration of road map for EU-Ukraine CAA, search for solution to the issue of mutual recognition of certificates, the EU’s recognition of aviation products already certified by Ukraine, and definition of the date for opening-up market. At the same time, there are some real-life issues slowing down the negotiation process. Among them are i) issue of refueling and aeronautical services on the territory of Ukraine, which are very expensive, ii) visa barriers for Ukrainian consumers, iii) no convenient slots for Ukrainian air carriers in European airports, iv) complicated adoption of new Air Code, etc.

Taking into account all afore mentioned, it could be said that CAA negotiations are extremely important for the EU and Ukraine that both strive for broader opportunities on air transport market and satisfaction of transport needs of their citizens. At first glance, it seems that mainly European companies and consumers will benefit from “opening-up sky”. Though, Ukrainians should understand that their sky will lose any perspectives in future without significant regulatory improvements in aviation law and more effective operation of aviation sector. Thus, CAA can play a role of strong catalyst for very rapid positive changes on air transport market of Ukraine