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Policy statewatch17 en

  1. 1. Institute for Development andMOLDOVA’S FOREIGN POLICY STATEWATCH Social Initiatives “Viitorul” Issue 17, February 2011DOES MOLDOVA NEEDLOW-COST AIRLINES?Leonid LitraMoldova’s Foreign Policy Statewatch represents a series of brief NEXT TOPICSanalyses, written by local and foreign experts, dedicated to the TO BE COVERED:most topical subjects related to the foreign policy of Moldova,major developments in the Black Sea Region, cooperation with Demilitarization ofinternational organizations and peace building activities in the region. Transnitria in theIt aims to create a common platform for discussion and to bringtogether experts, commentators, officials and diplomats who are context of strategicconcerned with the perspectives of European Integration of Moldova. and militaryIt is also pertaining to offer to Moldova’s diplomats and analysts a changes in Europevaluable tribune for debating the most interesting and controversialpoints of view that could help Moldova to find its path to EU.T he old-new government was invested and a continuation of its pro-European demarche was announced. The Governing Programme declares1 EU integration as the main priority and the continuation of reforms is envisaged, especially in the previously committed areas. As in the previous Programme, the government is keen to liberalize the aviation market and to join the European Common Aviation Area. Moldova is one of the most expensive air flight destinations in Europe. Moldova and Belarus are the onlyEuropean countries where low-cost flights are not operating because the market is not liberalized. Air transportliberalization is hugely popular within the public. Some 800.000 work abroad – they and their families are hugesupportive.1 Vezi programul de activitate a Guvernului pe 2011-2014, Jurnal.md, 13/01/2011, http://www.jurnal.md/ro/news/-doc-vezi-programul-de-activitate-al-guvernului-pentru-2011-2014-199268/
  2. 2. 2 Moldova’s Foreign Policy Statewatch Numerous governments have declared that they want air transport liberalization. Greceanii governmentadopted a strategy in 2008, which stated that markets would be liberalized by 2011. The Alliance for EuropeanIntegration 1 and 2 said air transport liberalization is a priority. But these government program and the public desireclashed with sector specific interests that want to retain the protectionist barriers favouring the national air carrier.This effect was seen when there were problems with Lufthansa on opening the Munich-Chisinau flight or MoldovianAirlines and Aerosvit. So far the air transportation sector has been successfully delaying and stonewalling thegovernments efforts to liberalize the sector. The question is whether Filat 2 government can take it on?State of Play The main rule of the European Common Aviation Area (ECAA) is market economy rule that is based ondemand and offer. In the context of Moldova, there was a decision to liberalize the aviation market since 2008 butprogress is still awaited. In countries where ECAA works the people are paying at least half a price of what is payingMoldovan passengers for the same service. Almost one million of passengers that are traveling by plane everyyear from/to Moldova are spending enormous amounts of money for an air-ticket. For instance, a round-trip fromChisinau to Paris would cost around 426 EUR and a round-trip from Bucharest to Paris with a low-cost companyis around 89 EUR. The difference of 337 EUR is the price for non-liberalization and maintaining and developing aNational Aviation company – Air Moldova, while the biggest regret is that the financial burden is on the shouldersof the ordinary consumers. Another example is that a round-trip flight from London to New York costs around 388EUR, which is less that the Chisinau-Paris flight or Chisinau-London. In a liberalized aviation market the role ofstate is limited to safety and security of the flights. Cheapest prices for round-trip air-tickets from Chisinau, Bucharest and Kiev (the search was doneon January 23, 2011 for the flights covering the period March 2 – March 10, 2011) No Destination Cheapest Price from Cheapest Price from Cheapest Price from Chisinau Bucharest Kiev 1 Berlin 324 EUR 184 EUR 175 EUR 2 London 408 EUR 80 EUR 132 EUR 3 Paris 426 EUR 89 EUR 190 EUR 4 Frankfurt 357 EUR 179 EUR 196 EUR 5 Rome 241 EUR 44 EUR 225 EUR 6 Lisbon 419 EUR 326 EUR 377 EUR 7 Vienna 316 EUR 70 EUR 258 EUR 8 Budapest 190 EUR 251 EUR 253 EUR 9 Nice 423 EUR 90 EUR 162 EUR Cheapest prices for round-trip air-tickets from London (the search was done on January 30, 2011 forthe flights covering the period March 9 – March 15, 2011) No. From London to… Price 1 Chisinau (with Air Moldova) 409 EUR 2 Chisinau (with Lufthansa and Austrian) 290 EUR 3 New York 388 EUR 4 Beijing 514 EUR 5 Dubai 398 EUR 6 Bangkok 524 EUR 7 Tbilisi 351 EUR 8 Moscow 177 EURStr. Iacob Hîncu 10/1, Chişinău MD-2005 Republic of Moldova 373 / 22 221844 phone 373 / 22 245714 fax office@viitorul.org www.viitorul.org
  3. 3. Moldova’s Foreign Policy Statewatch 3Where is Moldova now? Last year, the PM Vlad Filat sent a letter to European Commission president announcing the willingness tojoin the ECAA.2 Since that time, almost nothing changed, which is also due to the slightly different visions within theAlliance for European Integration on developing the aviation sector.3 Since the Alliance took office, the relationshipwith the EU has significantly improved, both on deepening some processes and opening of some other chapters.The Visa Dialogue, the negotiations over the Association Agreement, the consultations on launching the Deep andComprehensive Free Trade Area are only a few examples. At the same time, Moldova improved its democracyrating and is perceived as the leading country in the Eastern Partnership.4 But the leading role is not full withoutthe ECAA. There are countries around Moldova but also among other European neighbours that are one-stepahead Moldova in the field of liberalization of the aviation market. Such agreements were concluded with WesternBalkans, Georgia and Morocco, while the agreement with Jordan is pending. Also, there are negotiations of theECAA between the EU and Ukraine, Israel and Lebanon, as well as Commission has a mandate to negotiate similaragreements with Tunisia and Algeria.5 In addition to the problems related to finding low-cost companies to get on Moldovan market, there arealso internal issues. Both the government and the air transportation sector are split. In the government – thegoverning parties are in favour of air transport liberalization. The government program also states that air transportwill be liberalized. But the transport ministry is more hostile to liberalization idea. Whereas in the industry itself,stakeholders are also split. Air Moldova and ASAC (State Agnecy of Civil Aviation) are against, whereas Chisinauairport, Moldavian airlines (a private Moldovan operator) airport handling and catering are in favour of air transportliberalization. So this is not a split between the government and the industry.If you want to grow. Learn! The examples of other countries that joined the ECAA are very relevant for Moldova, which has limitedpossibilities for developing air infrastructure. The population of Latvia is about 2.2 million people. Moldova’s populationis 3.6 million people. The number of transported air passengers in Latvia in 2009 was 4.1 million6, in Moldova 806thousands. The difference is obvious. Another example is the development of HUB airports in Romania or Slovakiaor other countries in the EU. Moldova should learn from these countries because by liberalization, is not only aboutmaking the price lower trough bringing in low-cost companies, but is also about wider approximation process withthe EU that includes harmonization with EU legislation, implementation of EU aviation rules in areas such as safety,security, environment, consumer protection, air-traffic management, economic regulation, competition issues butalso growth of tourism, optimization of state bodies expenditures and development of infrastructure (also regionalairports). Of course at the beginning there should negotiated a gradual integration of Moldova in the ECAA andsome concessions might be asked, especially those related to the usage of aircrafts. Some argue that lack of visa free restricts travel and the low-cost companies that are to come on themarket are not going to have high passengers flow. That is true, Moldova does not have a liberalized visa regime,but smaller airports from countries without visa-free with the EU like Lviv or Odessa in Ukraine – also provide muchcheaper tickets than from Chisinau.2 Moldova says to EC about the intention to join European Common Aviation Area, Moldova.org, 31/08/2010, http://politicom.moldova.org/news/moldova-says-to-ec-about-intention-to-join-european-common-aviation-area-211998-eng.html3 Chisinau still pondering liberalization of airline market, Imedia, 19/03/2010, http://www.imedia.md/libview.php?l=en&idc=242&id=11764 Parmentier, Florent (2010): Moldova, a major European success of the Eastern Partnership?, European Issue No 186, 22/11/2010, policy paper, RobertSchuman Foundation5 EU signs air transport agreement with Georgia for integration into the European common aviation market, European Commission, 03/12/2010, http://eu-ropa.eu/rapid/pressReleasesAction.do?reference=IP/10/1658&format=HTML&aged=0&language=en6 Latvia the only EU member state to register increase in air passengers number in 2009, 23/07/2010, http://www.baltic-course.com/eng/analytics/?doc=29526 Str. Iacob Hîncu 10/1, Chişinău MD-2005 Republic of Moldova 373 / 22 221844 phone 373 / 22 245714 fax office@viitorul.org www.viitorul.org
  4. 4. 4 Moldova’s Foreign Policy StatewatchYes we can Moldova has a great opportunity to change the status quo of the aviation market. A research7 is showingthat the price for air-tickets will decrease by 50% in the case Moldova will get in the ECAA. Moreover, the numberof passengers using air transportation will grow to 1.5 million until 2012 according to the most pessimist scenario,or to 2.2 million according to the optimist development. There are low-cost companies that already showed interestin getting on Moldovan market, like Blue Air. This is also supported by the young generation that is insistentlypromoting this idea everywhere, including on social networks. In the last long, we are witnessing a process whenMoldovans are simply getting to Romania or Ukraine to fly cheaper. The negotiations over the Association Agreement and the implementation of the visa benchmarks representa great framework for a simultaneous negotiation of the ECAA. Until Moldova is done with visa liberalizationrequirements, the liberalization of the aviation market would be a brilliant synchronization and for Moldovan citizens,as providing the liberalized visa regime might take place at the same time with the entry on the market of the low-cost companies. Moldova hosted in September 2010 a mission of EU experts to assess the preparedness of Moldova tostart the negotiations on ECAA. According to the statement of the Minister of Transport, Anatol Salaru, Moldovamight sign the agreement in June 20118, however, at this moment it appears that signing the agreement in June2011 is by far a since fiction subject.Conclusions and recommendations The adherence to the European Common Aviation Area should be prioritized alongside the Visa Dialogueand the DCFTA as well as seen in a wider process of negotiating the Association Agreement. The “status” grantedto Moldova as a leading Eastern Partnership country is not full without belonging to ECAA. Moreover, the biggestbeneficiaries of the ECAA will be passengers that are traveling to/from European Common Aviation Area but alsoMoldova due to the possibilities to develop its infrastructure and to improve security, safety and services. Moldova should use the opportunity of friendly presidencies of EU (Hungary and Poland) to conclude theECAA and the internal political stabilization process after elections. At the same time, while negotiating the ECAAit should be given special attention to two aspects: the delay of the deadline for using soviet aircrafts and gradualinclusion in the ECAA in order to avoid the financial crash of the Air Moldova and to ensure a normal privatizationprocess. Also, on behalf of the civil society and population at-large there should be exerted public pressure on theGovernment and specialized state bodies to stick to the commitments that were previously taken, because thelonger delay the bigger politicians’ decrease of popularity, the higher prices for consumers, the more passengersflying from Bucharest and Kiev and the less development for aviation transport infrastructure and tourism.7 Bezniuc, Radu (2010): The perspectives of the reformation of the sector of the aviation transport services from the Republic of Moldova, Soros FoundationMoldova, Chisinau 2010.8 Prim-ministrul Vlad FILAT a prezidat astăzi şedinţa Comisiei Guvernamentale pentru Integrare Europeană, 29/07/2010, State chancellery, http://www.ncu.moldova.md/ro/news/show/8This publication was produced by IDIS “Viitorul” with the financial support of Soros FoundationMoldova and the National Endowment for Democracy. The opinions expressed in this publicati-on reflect the author’s/authors’ position and don’t necessary represent the views of the donors.Str. Iacob Hîncu 10/1, Chişinău MD-2005 Republic of Moldova 373 / 22 221844 phone 373 / 22 245714 fax office@viitorul.org www.viitorul.orgStr. Iacob Hîncu 10/1, Chişinău MD-2005 Republic of Moldova 373 / 22 221844 phone 373 / 22 245714 fax office@viitorul.org www.viitorul.org