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3.1 Prior to the process which led to the establishment within the EU of the single market in 1993, the air transport market across the whole of Europe was a collection of national markets. Domestic air services within each country were governed by national rules which varied enormously in the degree to which competition was permitted or promoted. International air transport in Europe was governed by the bilateral air services agreements between each pair of countries. Although some of these agreements were relatively liberal, all contained traditional ownership and control restrictions and many restricted market access and capacity, frequently allowing only one airline from each country to operate services, often on a limited number of specified routes. International fares were generally agreed between airlines under the auspices of IATA and both international and domestic fares were usually subject to government regulation. 3.2 With the development of two international agreements in 1987 which permitted partial capacity and tariff liberalization, ECAC took the first steps in Europe towards liberalizing the air transport market. However, it was within the EU that the real progress towards full liberalization was made, aided by the EU’s institutional framework and its general impetus towards economic integration. A process of progressive liberalization swept away the pre-existing institutional barriers to entry and competition and created a genuinely single market within the EU. This has since been extended to cover Iceland, Norway and Liechtenstein through the creation of the European Economic Area, while Switzerland is also now associated with the market through a bilateral agreement. In advance of their full accession to the EU, negotiations are under way with eleven more ECAC States on the early creation of a yet wider European Common Aviation Area based on EU rules. The description that follows focuses on the experience of liberalization as it has occurred thus far within the EU. 3.3 The “Third Package”
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