The European Court of Justice's ruling on bilateral aviation treaties has the potential to accelerate progress toward global deregulation

Perhaps the judgement just issued by the European Court of Justice (ECJ) on bilateral aviation agreements is not going to change anything immediately, but it has set the scene for a global revolution in the way the international air transport system is regulated.

Seven European Union countries have been told that their "open skies" bilateral aviation treaties with the USA are illegal, so it would be easy to be misled into thinking that the ECJ's judgement had something to do with open skies or the USA. But it doesn't. The European Commission just had to decide on some targets for the first stage of its campaign to clarify how EU law affects aviation bilaterals, and the most recently renegotiated agreements all happened to be with the USA and were tagged "open skies". The ECJ judgements will actually affect each and every bilateral aviation treaty between EU member states and non-EU states.

At present, flights between the USA and countries in Europe are controlled by agreements - bilateral aviation treaties - designating which airlines may operate the routes, who may own the airlines, where the owners may live and headquarter their businesses, how much capacity (seats and freight tonne/kilometres) the airlines may offer at what price, and to which airports at both ends of the routes they may operate. The world does not have any other civil industry that is so hamstrung by regulations.

Although this was not its purpose, the ECJ's judgement has dealt a blow to bilateral aviation treaties by highlighting - again - how much they restrict trade, and by forcing EU states to forge less exclusive bilaterals.

The main issue on which the ECJ has ruled is actually fairly narrow. It is concerned with clauses within a treaty rather than the treaty as a whole. A treaty between a non-EU state and an EU state, says the ECJ, may not exclude airlines from any other EU nation from operating on the approved routes between the two parties to the bilateral. EU states would be wise to follow guidance from the judgement as more cases will undoubtedly follow. Any such agreement remains an exclusive aviation treaty, but not a traditional bilateral one - the parties to it have increased in number. Meanwhile the ruling, in forcing politicians and civil servants all over the world to rethink what purpose bilateral aviation treaties serve, has hopefully presented them with the opportunity to review air transport regulation in a world that operates to World Trade Organisation (WTO) principles in other sectors. But no-one should hold their breath awaiting change. A whole way of thinking needs to be reversed, and this will not happen overnight.

Although the ECJ, being a court, is not delivering a political judgement, it has certainly delivered to the European Commission its hoped-for opportunity to increase pressure on the USA to dump bilaterals in favour of a North Atlantic aviation free trade area. The USA, meanwhile, can say that it does not have to renegotiate its bilateral aviation treaties because these have been conducted with sovereign states in the time-honoured way. But in reality it can only stall for time, and the same is true of all other states that have bilateral aviation treaties with EU states. They will not be able to ignore the fact that EU states are bound by EU law when negotiating future aviation treaties or changes to existing ones.

Much horse-trading will be necessary to make the system work, however, and the Commission knows this. Non-EU objectors to the treaty can spoil the operation. For example, under the ECJ rules, Lufthansa could operate from Paris to the USA and France has no means to object, but the USA could refuse landing rights to Lufthansa. Hence the Commission's argument that it should conduct all negotiations on behalf of member states.

There is no problem with precedent here. The EU has negotiated bloc aviation agreements with Switzerland and with Norway, and another broader trade agreement with Iceland and Norway. The USA acknowledges the EU's competence in other trade issues. Acknowledgement of its competence in respect of aviation agreements is only a matter of time.

The ECJ's judgement may be fairly narrow in its scope, but forcing a group of bilateral aviation treaties to become less exclusive is long overdue and the thin end of a wedge that will, in time, see nation-to-nation bilaterals liberalise and eventually disappear. If this judgement hastens global deregulation, including the abandonment of restrictions on airline ownership, then it is to be wholeheartedly welcomed.

Source: Flight International