COVID-19: EU Commission launches proposal to amend key regulation in the aviation sector
As a result of the impact of the COVID-19 pandemic on the aviation industry, on 29 April 2020 the European Commission issued a proposal to amend Regulation (EC) N° 1008/2008 of the European Parliament and of the Council on common rules for the operation of air services in the community.
The new proposal (2020/0069 (COD)) puts the focus on three topics affecting the aviation market: (1) air carrier licencing rules, (2) traffic right restrictions, (3) awarding and prolongation of ground handling contracts.
1. Air carrier licencing rules in case of financial problems
Under the current Regulation (EC) N°1008/2008, the operating licence of an air carrier that is unable to fulfil its actual or potential financial obligations for the next 12 months, must be suspended or revoked by the Member State. A temporary licence for maximum 12 months could however be awarded.
The Commission understands that issuing a temporary licence could send a negative signal to the market regarding the air carrier’s financial situation, thereby creating a vicious cycle, which could be even more detrimental to the carrier’s financial situation.
Therefore, instead of forcing air carriers in financial difficulties to rely on temporary licences, the Commission proposes allowing Member States not to revoke or suspend an air carrier's licence in these circumstances.
However, the obligation to monitor the financial fitness of air carriers remains unaffected. The Member States must ascertain that safety is not at risk, and that there is a realistic prospect of a 'satisfactory financial reconstruction' within the following 12 months.
This proposed measure is for a limited period. Member States can only rely on this exception for assessments of the air carriers' financial situation carried out from 1 March 2020 until 31 December 2020.
2. Procedures applying to the imposition of traffic rights restrictions
Article 21 of the current Regulation (EC) N°1008/2008 allows Member States to refuse, limit or impose conditions on the exercise of traffic rights. This allows Member States to deal with 'sudden problems of short duration resulting from unforeseeable and unavoidable circumstances'. The concept of ‘short duration’ covers a period of a few days only, after which the imposed measures could be extended for additional periods up to a maximum of 14 days.
Unable to have foreseen a crisis of this intensity and duration, Member States would be faced with an immense administrative burden when seeking to comply with this Article. The European Commission hence proposed a temporary derogation.
According to the proposal, Member States may refuse, limit or impose conditions on the exercise of traffic rights for a period exceeding 14 days. The applicability of the principles of proportionality, transparency, objectivity and non-discrimination remains unaffected. It must however be noted that the Commission's right to – at its own initiative – suspend a Member State’s action in application of the proposed article also remains unaffected.
This new regime will only be applicable by Member States between 1 March 2020 to 31 December 2020.
3. Awarding and prolongation of groundhandling contracts
The Commission has proposed amending the 1008/2008 Regulation, to avoid detrimental effects of the COVID-19 crisis on the groundhandling market.
A first measure would allow groundhandling service providers to bridge the current financial difficulties, by taking loans from banking organizations backed up by a guarantee of a Member State. Certain criteria would however need to be satisfied in order to do so, including an assessment of the sustainability of the company applying for the loan.
This is likely to be problematic for groundhandling service providers active in airports where Member States decided to limit free access to the market. These service providers are by definition selected for a period of maximum seven years. An extension of these contracts for a longer period could evidence the required sustainability, hence increasing the groundhandling service providers' chances of obtaining a loan.
The Commission therefore proposes that the managing body of an airport may prolong the contracts of these groundhandling service providers until 31 December 2021, provided that these contracts would normally have expired between the date of entry into force of the new regulation and 31 December 2021.
A second proposed measure anticipates the situation where a groundhandling service provider, active in airports where Member States limited free access, becomes bankrupt.
Under normal circumstances a new selection procedure should be organised under Article 11 Directive 96/67/EC in order to select a replacement for the groundhandling service provider that seized its activities.
As the circumstances might however require an immediate replacement, the Commission has proposed a measure which would allow airport managing bodies to select a new groundhandling service provider without going through the selection procedure for a maximum period of 6 months or until 31 December 2020, whichever is longer.
This second measure will apply from 1 March 2020 until 31 December 2020.
Extension of applicability
As the COVID-19 crisis is still developing and it is impossible to predict the duration of its detrimental effects, the Commission anticipates the need to amend the applicable periods proposed.
A first summary report and possible amendment of the applicable periods is scheduled to be presented to the European Parliament and Council by 15 November 2020.
We expect this first proposal of the Commission to be welcomed by the aviation sector, as it introduces some much needed relief measures following the ongoing impact of the COVID-19 pandemic.
Further updates will be provided as we follow whether the proposal is extended, amended, or limited during the further legislative process.