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Warsaw, July 2, 2009

Mr. Cezary Grabarczyk
Ministerster of Infrastructure
4/6 Chałubińskiego Street
00-928 Warsaw

The policy of the Civil Aviation Office deprives Polish budget of significant income

Dear Mr. Minister,

Polish aviation authorities (Civil Aviation Office - CAO) are handing over the Polish charter market on a silver platter and depriving country's budget of significant income. Now that the Polish government is counting every zloty to rescue the Polish financial situation, even considering raising taxes without having any long-term strategy and based only on discretionary rules, without clear procedures, they are letting foreign airlines, which do not contribute to the Polish budget, enter the Polish market. In comparison to other European countries, Polish authorities do not have any investment expectations and treat them equally to domestic air carriers towards which expectations are disproportionately higher. Thus, foreign air carriers, in the name of this policy, are not only not contributing to the growth of the market but they are also exploiting it and taking away Polish flight personnel jobs and depriving Poland of tax revenues. Polish flight personnel, which owing to their high qualifications are appreciated worldwide, are left without jobs and are often exposed to loosing their certificates or forced to leave the country and move to exotic countries so that they can fly and maintain their licenses. It is especially visible at this time of crisis, which is also emphasized by the number of applications we are receiving after the bankruptcy of Centralwings.

According to the estimations from 2008, the Polish charter market is worth more than 2.5 billion zloty and is one of the fastest growing markets in Europe.  Potential income from indirect and direct taxes/tax amounts to PLN 300 million annually (which equals the amount that was spent on reconstructing national road No. 2 from Siedlce to Terespol or the estimated cost of building a giant sport centre in Rzeszow). This amount would also mean indirect and direct job openings. This fact was noticed by foreign air carriers but seems to be completely ignored by the Polish authorities responsible for regulations.

In its policy published on the official website,  the CAO claims that because they are taking into consideration the bad economic situation of  the companies operating on the Polish aviation market, the CAO makes an effort to help develop not only Polish air carriers but also to help the companies whos business is connected with air traffic services, including ground handling companies, airports management companies and also travel agencies, establish better access to the offers of their potential contractors and most of all to let Polish citizens gain better access to the wide tourist offer. It is seen as executing statutory obligations (aviation law) to give foreign carriers permits to transport considering public interest commonly understood as "an interest of all people living within the commonwealth ensuring the fulfilment of specific, legitimate interest of the entirety" (source: http://www.ulc.gov.pl/index.php?option=com_content&task=view&id=644&Itemid=1)

It is hard to agree with the above statements because of the following facts:

• When referring to the aviation law, the CAO mentions "statutory obligations to give foreign carriers permits to transport" while the Act of 3 July 2002, Art. 195 on the aviation law provides that "permits can be given", simultaneously determining the terms which have to be met inclusively. Therefore, there is nothing mentioned about any obligation. Moreover, aviation law gives the CAO an option to apply the "non objection" rule (so eagerly used by the other Member States) by which the necessity to check the ability of domestic air carriers to launch flight connections before giving foreign air carriers a permit to launch the same flight connections is assumed.
• The CAO seems not to realize that the regulations applying to the schedule flights market are significantly different from those applicable to charter operations. Specifically, in the case of schedule flights it is airlines that decide whether or not to launch a new connection that would consequently stimulate the development of an airport concerned. On the contrary, in the case of a charter market it is travel agencies that decide about the connection network and the capacity of the flights. Then they offer a charter airline to operate the flight. Thus, opening the Polish market to any foreign air carrier will not increase the number of charter connections. Especially in times of crisis both the number of charter connections and the capacity of flights will be significantly reduced. The perfect example of this can be the lack of long distance charter flights.
• Opening the market to foreign air carriers without having clear regulations and strategies does not help the development of both these air carriers and also companies connected with air traffic service including ground handling agencies and airport management companies. Undoubtedly, air carriers are loosing because of this policy because in times of crisis the market is strongly limited by opening it to the foreigners. Hence, it discourages investors, has a negative effect on turnover and employment, and also decreases revenues from indirect and direct taxes in the country's budget. Furthermore, domestic air carriers that have to follow the regulations of licensing are compelled to create their own structure and guarantee technical service in their domestic operational centres. Hence, the necessity to create their own service organisation that is subject to certification (PART 145) arises. This results in creating direct job openings or in co-operating with domestic contractors which, indirectly, creates job openings. A similar effect is created because of the fact that the range of service like catering, ground personnel service or parking the plane in the base reserved by domestic air carriers at Polish airports is much broader than it is in the case of foreign air carriers. Also, when a certain airport is chosen to be an operating base the number of fuel refuellings increases which results in higher profits for fuel suppliers at this particular airport. All of it has a direct effect on airports‘ income, handling agencies and other companies connected with airport services and therefore on job openings in these sectors/sections. The results of the CAO's hitherto policy are even more than enough spectacular because none of the Polish airlines has developed until now. On the contrary, only bankruptcy of airlines has been observed and the very bad economic situation of the Polish national air carrier is being vigorously discussed in media. The bankrupcy of Lot Ground Services, one of the two ground handling agents operating at the airport in Warsaw, is also an outstanding evidence of the CAO's policy, especially considering the geographic advantages that this airport should enjoy.
• From a Polish citizen‘s point of view this such a policy is not beneficial and in many cases it is or may be harmful. It is hard to be talking about care for passangers while letting a foreign air carrier fly from Varadero (Cuba) to Warsaw with two or three stopovers, which results in discomfort and a longer time of travel and informing passengers about it at the last moment at the airport. At the same time we offered  a direct flight on a wide-body aircraft and we had additional transport abilities which the CAO was informed about in advance. The preference of an air carrier holding a Polish license and certificate would have a positive effect on the quality of service. The presence of Polish speaking staff - which can be a significant advantage when it comes to communication - and the notices and instructions in a native language on board of the planes can be crucial in the case of emergency. Also, the personnel would have a chance to improve their qualifications thanks to passengers' comments, accessibility of air carriers, clarity and easiness to lodge complaints and so on. In addition, at the base airport we employ personnel responsible for supervising check-in so that it is smooth and our coordinators serve as a source of information and assist passengers all the way through to their plane.
• Allowing foreign air carriers to enter the market without specific regulations and strategies will not increase a tourist offer because it is prepared in advance by travel agencies and then based on that, the air carriers are chosen. Quality is still not the most important criterion for the travel agencies operating from Poland, the most decisive factor being the price of the service. Because of the variety of tourist offers, including the capacity, the range and a certain positioning of "charter transport product", there would not be a conflict between the security of the market and the competitiveness of the offer for a Polish passenger.

Therefore we notice with regret that the public interest is being misunderstood by the CAO. The Policy of the Office is not improving the situation in the Polish aviation but it is compounding upon it. I also have allowed myself to attach the summary of the tax revenues by Air Italy Polska in the last twelve months to give a better picture of the potential income that Poland is deprived of by the CAO allowing foreign carriers to enter the market.

ZUS [social security contributions] - more than PLN 3 million, PFRON [contributions towards disability benefits] PLN 109,000 and Urząd Skarbowy [revenue office]: more than PLN 1.7 million from direct taxes, not speaking of other payments and indirect taxes. Additionally, Air Italy Polska has a staff of more than 100 people in Poland, who are employed by the Polish branch (not by Italy).

Therefore, we request that the CAO's policy be verified whether it is really an act of care for public interest and also whether the requirement of reciprocity (as defined in Art.195 par. 1 item 2) was complied with in the process of granting permits and evidenced by the CAO.

In their policy the CAO also maintains "retaining high consolidated safety standards regulated by European Union regulations and quality of service." In the case of airlines licensed in Poland they can be fully controlled and there are no restrictions, whereas foreign airlines cannot be checked thoroughly because of various restrictions. Therefore, we request information about the scope and the outcomes findings of the inspection carried out in foreign airlines and what this data shows in comparison to other European countries.

We would appreciate you consider all of the above arguments in the process of investigating the complaint about the CAO's policy regarding the permits to foreign air carries to launch flights from the territory of Poland to the destinations outside the European Union. We would also like to ask you to take this complaint into consideration while specifying detailed conditions and the criteria for granting permits connected with air transport to foreign air carriers as defined in Art. 202 of Aviation Law.

I would also like to emphasize one more time that Air Italy Polska is not trying to dominate in the market but we are fighting for fair competition. We would like other companies to invest in our country. It is not fair that foreign air carries are allowed to operate in the Polish market while Polish airlines cannot operate charter flights from countries like Germany, Italy or Belgium. Developed markets have been protecting their domestic airlines. I hope that the Polish government also cares for public interest and will protect the long tradition of Polish aviation.

Sincerely,