New Zealand may beat Australia to an open EU aviation agreement

New Zealand could beat Australia in establishing an open aviation agreement with the European Union, says a top European official.

Olivier Onidi, head of the European Commission's unit which oversees the single European aviation market and the conclusion of international agreements, was in Sydney earlier this month for the Australia Pacific Aviation Outlook Summit.

He said the EU's policy objectives included "extending the success of the single aviation market beyond Europe", which involved negotiating comprehensive air transport agreements with "key and like-minded, liberal partners".

Onidi told the Business Herald New Zealand's liberalisation record in international air services was appreciated in the EU, and it was possible New Zealand might reach agreement with the EU before Australia.

He recognised that the requirement to allow cross-investment in airlines, including ownership or mergers, was the most difficult issue for New Zealand, as it was for Australia.

The EU's decision to negotiate an open aviation agreement with New Zealand was welcomed last year by then Transport Minister Annette King.

Air New Zealand is majority Government-owned, unlike Australia, where the Government relies entirely on the legislative restriction of 49 per cent foreign ownership.

As foreign ownership could occur only where there is a willing seller, an agreement with the EU allowing cross-border ownership would not affect Air New Zealand unless a government of the day no longer wanted to retain its majority shareholding.

However, opening market access would require a significant addition to the agreements the EU has so far reached with the US and Canada, which involved non-stop transatlantic flights.

Because of the distance, any acceptable agreement would need to allow the airlines to carry passengers from intermediate points where they need to stop for refuelling - such as at Los Angeles and Hong Kong, as provided for in New Zealand's agreement with Britain.

Reaching agreement on regulatory issues involving safety and security seems less problematic, but regulatory convergence on environment issues may depend on the emissions trading scheme under consideration by the New Zealand Parliament.

Onidi told the summit negotiations had begun with Australia and New Zealand to advance on earlier agreements.

The aim, he said, was to establish an "Open Aviation Area", and he suggested there were promising prospects for the conclusion of a "comprehensive benchmark aviation agreement" between the EU and Australia, with "ambitious objectives" for market access, liberalisation of airline ownership and investment rules, and regulatory co-operation and convergence in environment, safety and security.

Mike Mrdak, the Australian transport department secretary, confirmed at the summit that reaching an aviation agreement with the EU would be one of his department's top priorities over the next 12 to 18 months.

However, Mrdak also said that the current 49 per cent cap on foreign ownership of Australian international airlines would not be lifted because of the risk of breaching bilateral agreements and the Government's commitment to maintaining a strong Australia-based aviation industry.