European Comission to negotiate aviation agreement with Baku
The European Commission wishes to develop a common aviation area between the EU and Azerbaijan, Europolitics reported. This would imply a gradual opening of markets and also that the country gradually implement the EU's regulations. "The strategic location at the crossroads of Europe and Asia make Azerbaijan an obvious candidate for a common aviation area agreement with the EU. In January 2011, the Azeri authorities expressed their interest in negotiating a common aviation area agreement with the EU," said the Commission in a communication issued on 30 August (1). Priority areas would be market opening, freedom of establishment, equal conditions of competition and common rules in the areas of aviation safety, aviation security, air traffic management, social conditions and environmental protection.
Passenger traffic between the EU and Azerbaijan is still at a relatively low level but can be attractive to EU airlines in terms of yields and revenues due to a high share of business travel related to the oil and gas industry. In the EU, flights to and from Azerbaijan mainly connect with the UK (35% of the market), Germany, Austria, France, Sweden and Latvia.
Azerbaijan has already negotiated air services agreements with 21 member states - Austria, Belgium, Bulgaria, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Poland, Romania, Slovakia, Spain, Sweden and the UK - but they are rather restrictive in particular with regard to the capacity arrangements (eg frequencies).
According to the Commission, demand for air travel between the EU and Azerbaijan exceeds supply. The result is a market in which fares are held artificially high and leisure travel is suppressed. An increase in competition could lead to a drop in fares and could thus benefit passengers. An impact study carried out by the Commission estimates the economic benefit of such a common aviation area agreement at around €44.2 million during the first five years after liberalisation (mainly due to increased connectivity, lower air fares, increased air travel and associated economic activity). An EU-Azerbaijan agreement would create new market opportunities for air carriers in the EU. The Commission notes that some EU air carriers have expressed interest in operating additional services or starting new services to Baku, if the present capacity restrictions would be lifted. Such an agreement could also facilitate the integration of Azeri carriers into existing alliances of EU air carriers.