The long-running feud over Siberian overflight charges for European carriers remains unresolved, and the European Union (EU) must unify its airlines around a common approach, while finding ways to pressure the Russian Federation to activate a deal that phases out these royalties.
Meanwhile, a potential new irritant has surfaced. On July 1 Russia plans to introduce new rules on Passenger Name Record (PNR) data. However, EU airlines are not allowed to submit passenger data to any non-EU country unless that country has an agreement with the EU guaranteeing a certain level of protection for the integrity and the secrecy of these data.
“As European airlines we cannot be caught in the middle of two or three contracting legal regimes,” says Athar Husain Khan, acting secretary general of the Association of European Airlines (AEA). There is a discussion going on between Europe, the International Civil Aviation Organization and Russia to clarify the content and the execution of the PNR data requirements. Also, thehas expressed some concerns and warns that some of the provisions—such as the tracking of passengers overflying Russia, or the need to provide data not normally collected by global booking systems—will be extremely costly and time-consuming for the aviation industry to comply with.
The PNR issue was discussed on the “highest possible level” during meetings of the European Commission and Russian ministers last week in Moscow and it “was concluded that we should try to find a solution,” Henrik Hololei, head of the EC Cabinet of Transport Commissioner Siim Kallas, tells Aviation Week. But he admits “for the moment it creates confusion for EU airlines. We don't have this data-sharing agreement with Russia, and the Russians will implement their new rules.”
With its novel PNR demand, Russia is once again maneuvering the EU into a corner. Russia outsmarted the bloc when it linked the Siberian overflight royalties and the inclusion of aviation in the EU Emissions Trading System (ETS).
The EU and Russia—in 2006—agreed in principle that new overflight rights issued to European airlines from January 2012 should be free of charge and legacy Siberian fees would be abolished from 2014. The agreement was fine-tuned in 2011 and was a precondition for the EU to give its green light to Russia's World Trade Organization accession. Russia however withheld the new “free of charge” rights in protest against the EU ETS.
An EU official described Russia's move to link the ETS and the agreed principals as “scandalous” and “not correct.” Kallas was equally forthright during last week's executive discussions in Moscow and in a bilateral meeting with Russian Transport Minister Maxim Sokolov, when he stressed that it is “unacceptable” for Russia to establish this artificial link between two entirely separate issues. He urged his counterpart to respect the formal commitment on the phasing-out of Siberian overflight royalties.
The outcome of the meetings resulted only in an agreement to resume the dialogue before summer. “We will use this in order to discuss the whole range of issues that are creating challenges, including the implementation of the agreed principles. We will draft a report and present recommendations to the council on how to go forward,” Hololei reveals.
For AEA's Kahn, a new round of talks means “the overflights are still very much what they were and always have been, and a gloomy but probable outlook is that in the remainder of 2013 nothing is going to change.” He points out that the European airline industry “celebrated” the 20th anniversary of the Siberian overflight quandary a couple of months ago.
European airlines pay about €400 million ($511 million) a year for the right to use critical routings over Siberia to countries such as China, Japan and South Korea, according to the EC. The commission argues that the payments are neither cost-related nor transparent, and that the bulk of the money goes straight into the pockets of Russian airline. The EC contends that these payments and the relating provisions in the bilateral agreements with member states are in breach of EU antitrust laws and of the Chicago Convention on civil aviation. Also, the bilaterals impose different conditions on EU airlines depending on the country they are based in, creating an additional distortion of competition.
Games are being played on both sides: EU member states so far have continued to negotiate on a bilateral basis with Russia to safeguard the existing traffic rights and privileges of their national carriers. Hololei contends the EC would be in a stronger position to negotiate traffic right issues if the bloc's 27 member states would give it a mandate to negotiate a horizontal or comprehensive air services agreement.
The AEA sees some merit and justification in the commission's argument that Europe needs to speak with one voice, but insiders caution that the Russian authorities might not be willing to accept the EC as the sole negotiating partner. Russia has only recently recognized the EU designation—a requirement confirmed in a ruling of the European Court of Justice in 2002—and less than a handful of bilateral air services agreements (BAS) between EU countries and Russia have been adapted to include this EU-designation clause.
EU officials indicate that the European Commission might take the infringement procedures further to speed up this process. The EC has initiated infringement procedures against its member states over their BAS with Russia in 2010.
The commission believes it has leverage over Russia and during his meeting with Sokolov, Kallas emphasized that the existing Siberian overflight system is counter-productive for the development of Russia's aviation industry as well. Most of the payments go to Aeroflot and this deprives the government of desperately needed resources in air navigation equipment, which would be crucial to improve the functioning of Russia's overall air transport system. He also stressed that the “remarkable direct subsidization of Aeroflot” has a very negative impact on the development of other Russian air carriers and is extremely problematic from a competition policy perspective.
The commission is currently preparing a road map on EU–Russia aviation relations. The question of reciprocal treatment of Russian air carriers overflying EU territory is part of these deliberations.
Hololei insists there is no room for negotiations. “Russia has to implement the agreed principles, point over,” he says. He vows the EU will not allow a linkage of the Siberian overflight fees to any new Russian demand or desire, such as the certification by theof the assembly line of the regional jet and the recently opened HeliVert assembly line of the AWJ139 helicopter in Tomilino, near Moscow.