A Report on the Impact of EU Aviation Legislation on Aerospace

This report examines the impact of EU aviation legislation, specifically focusing on the Common Aviation Area and Open Aviation Area, on the aerospace industry. The legislation, a product of multilateral decision-making, has fostered economic stability and growth within the sector by promoting competition, diversification, and technological advancements. The report highlights how EU corporations, through specialization and strategic partnerships, have maintained a strong position in the global market. It also discusses the role of government support and the evolution of the European aviation industry, including mergers, acquisitions, and the diversification into high-tech products. The example of Thales, a French company, showcases the interdependence within the European aerospace network. The report concludes that EU aviation legislation has been instrumental in the industry's success.

EU and Aerospace and Aviation
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The multi-institutional and multilateral nature of EU decision making has lead to
development of legislations that are the driving forces for EU businesses. The paper will
specifically identify one of the legislation which is product of multilateral decision making in EU
and describe how the legislation has benefited air industry.
One of the recent legislation in EU in Aerospace and aviation is formation of the
Common Aviation Area and the Open Aviation Area (Gudmundsson, 2015). The legislation has
helped aviation industry in many areas.
EU corporations, as a rule, specialize in one of civil aircraft engineering sectors (the core
business), have the combat air force division and a hi-tech business. This structure provides for
economic stability of such corporations in the global highly competitive aviation market, growth
of labor productivity and stock value. Furthermore, the governments of European States, despite
the availability of serious American competitors, support competition, first of all, in the combat
air force sector, ensuring the economy of budget resources of their countries (Suder, 2011).
EU corporations, thanks to competition and the well-thought-out diversification of their
businesses, ensure a steady growth in economic indicators (total revenue, stock exchange value
of shares, modernization of products). It is concluded that in the face of increasing competition
in the global aircraft industry (Bocola, 2016).
Over the past decades, the European aviation industry has gone a long way, repeating in
general the actions of American aircraft manufacturing corporations. At the first stage (1980s),
which included the diversification of the business through the acquisition of smaller high-tech
companies, the economic stability of the companies and their intellectual potential were
increased. At the second stage, again, due to mergers and acquisitions, enlargement of

corporations took place, which allowed to reduce managerial costs, increase R&D expenses, use
the economies of scale, etc. The number of aircraft manufacturing corporations has decreased
significantly, although it has not come to monopoly (Pisani‐Ferry, 2014).
A characteristic feature of the diversification processes carried out by these companies
since the 1980s is the reorientation of part of their production to the production of electronic or
other high-tech products. Another example is the French company Thales, which produces
information systems for aerospace, military and naval applications, which ranks third in the
world in the production of airborne radars and electronic warfare systems (EW). It produces a
significant part of the components of on-board electronic equipment for military aviation. Thales
electronic warfare systems include jammers and electronic intelligence equipment, as well as
integrated self-defense systems for airplanes and helicopters (Kirkegaard 2015b). The main
shareholders of Thales are the French government (27, 1% of shares) and Dassault Group (25.9%
of shares). Thales shares are traded on the London Stock Exchange and are showing steady
growth. Over the past year, their value has almost doubled. In addition, all European aerospace
corporations are interdependent, i.e. in fact, they form a huge network structure (through the
supply of components, mutual ownership of shares, etc.), which does not interfere with
competition between companies on a European and global scale.

References
Bocola, L. (2016). “The Pass‐Through of Sovereign Risk.” Journal of Political Economy 124,
no. 4: 879‐926
Kirkegaard, J. F. (2015b). Toward a European Migration and Mobility Union. PIIE Policy Brief
15‐23. Washington: Peterson Institute for International Economics
Pisani‐Ferry, J. (2014). The Euro Crisis and Its Aftermath. Oxford: Oxford University Press.
Suder, G. (2011). Doing business in Europe. London : SAGE Publications Ltd
Gudmundsson, S. V. (2015). European Air Transport Regulation: Achievements and Future
Challenges. SSRN Electronic Journal. Retrieved from:
https://www.researchgate.net/publication/279176742_European_Air_Transport_Regulation_Ac
hievements_and_Future_Challenges