Europe's airline industry will be deeply affected by a ruling yesterday from the European Court of Justice, but it is likely to be several years before the full impact and implications become clear.
The court said eight member-states have broken various aspects of EU law by reaching bilateral agreements with the United States over landing rights for their airlines on transatlantic routes.
The decision opens the way for negotiations which could give the European Commission the right to reach an overall aviation trade agreement with the United States. In turn this could lead to a radical change in the regime governing the airline industry within Europe and between the EU and the US - resulting in cheaper fares and much more flexible arrangements for air travellers. There would be mergers of national airlines.
At present it is not possible for a European airline to fly from any city it wishes in the EU to the US, since it must depart from national airports. American carriers are free to fly on within Europe, but European airlines cannot do the same in the US. This is the result of the archaic scheme of controls that currently applies, based on national sovereignty and elaborate systems of protectionism. The bilateral agreements reached between the US and Austria, Belgium, Denmark, Finland, Germany, Luxembourg, Sweden and the United Kingdom were negotiated on this basis. While they have preserved access to the US market for national airlines and protected them from competition, in the aggregate this has maintained expensive fare structures and given the US a decisive competitive advantage in Europe.
The European Commission is determined to use the ruling to achieve the right to negotiate an overall airline agreement with the US, just as it can now do so on most aspects of their trading relationship. Whether the member-states will be willing to concede this right remains very much an open question. The ruling found the bilateral agreements breached several aspects of EU law, in which the Commission already has exclusive competence; it also found that they are discriminatory within the EU. This will not be sufficient to give the Commission the negotiating right it seeks, since the court did not rule it has sole authority.
Ireland and other member-states will have to weigh up the potential costs and benefits arising from this ruling. Undoubtedly the Commission would be in a stronger position to negotiate with the US and reach a more equitable agreement if it were given that right. The unfolding implications would include cheaper and more flexible arrangements for transatlantic travel. Against this must be put such issues as preserving the Shannon stopover or the national airline, Aer Lingus. Neither of these would be automatic casualties of a more streamlined system, since states can bargain and competition applies. A new system has much to offer European airlines and their users.