Europe’s new aviation strategy: how will manufacturing be affected?

Following the release of Europe's aviation strategy at the end of 2015, Volodymyr Bilotkach, a senior lecturer in economics at Newcastle University, discusses how some of its policies could affect the commercial aviation industry.

The Aviation Strategy for Europe, adopted by the European Commission in December 2015, highlights the key issues facing the European Union’s aviation industry in the near future.

While the Strategy addresses a number of issues, two in particular will have an impact on manufacturers: the use of drones and other new technology, and the impact of changes to the labour market.

The Commission's understanding of the changes in technology, and in particular of the safety and security challenges created by the unmanned aircraft (drones), will be welcomed by the industry.

The Strategy envisions a flexible and comprehensive approach to regulating the safety of drones-based operations, which is also a very welcome move.

There are, however, some areas of the Strategy which could be problematic for manufacturers of drones.

Eurocontrol is paying increasing attention to the issue of safety of unmanned aircraft; but there is a lack of clarity over the distribution of regulatory roles as they apply to these new users of air space between Eurocontrol, EASA and other organisations.

The emerging market for drones is clearly international, and some drones will be sold and used in EU airspace that have been manufactured outside the EU.

Similarly, EU-based drone manufacturers will be selling their products in other parts of the world. It is crucial that any regulations imposed on manufacturers within the EU do not hamper their competitiveness on the global market.

The impact of labour market regulation also features in the Strategy. In aviation-related industries, the markets are mostly international in nature. A pilot qualified to fly a Boeing-737 aircraft can find a job anywhere in the world.

Within the EU-wide open airline market, however, some airlines have started combining the international nature of the labour market with the differences in national labour regulation to their advantage.

For instance, some airlines employ their pilots using the Irish labour laws, regardless of where the pilots are based, as Ireland has weaker labour laws and lower taxes than many countries.

The situation is similar to the "flag of convenience" setup we can observe in the ocean shipping industry where, for instance, to take advantage of the beneficial regulation and tax regime a number of ocean ships are registered in Mongolia - a landlocked country.

Perhaps only strong labour unions are preventing from this sort of practice from becoming wide-spread within the aviation industry.

The Strategy’s proposals on the labour market could have a big impact on companies and workers in the manufacturing sector. Parts of the Strategy will have to be adhered to by those in the Chinese and Japanese manufacturing sector which produces much of the aeronautical equipment and parts used by European companies.

This means that the EU will shortly have to face head-on the issue of balancing the interests of firms and those of aviation industry workers.

On one hand, firms are free to do whatever is not expressly banned by the law. On the other hand, exploitation of country-specific legislation should not unduly disadvantage workers.

The Strategy suggests that the EU should work to establish a bilateral approach in order to ensure safe working conditions for manufacturing workers in Asia and to ensure the products are of a standard accepted by the EU market.

It is important that the Commission establishes a dialogue as soon as possible between all the various stakeholders if it is to achieve its aim of harmonising the relevant regulations within the EU and globally.

The policies around drones and labour markets detailed in the new Aviation Strategy for Europe could have a dramatic impact on manufacturing in the European aviation sector. The emerging drone market will be subject to tougher regulation if the new laws outlined in the Strategy are enforced.

Similarly, the implementation of the Strategy could also result in a tightening of rules across the aviation labour market. The Strategy is still in the negotiation phase, so it will be interesting to see which interest groups and states have most impact on the proposals.

Volodymyr Bilotkach is a senior lecturer in economics at Newcastle University Business School

 

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