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10/12/2016

Commission mulls new measures against aviation subsidies from third countries

Transport

Commission mulls new measures against aviation subsidies from third countries

Turkey represents “a bigger challenge for Europe than the Gulf countries”, EU officials say.

[Eric Salard/Flickr]

The issue of subsidies and “unfair pricing” in the aviation sector will be an “important” part of the upcoming talks with Qatar, the United Arab Emirates and Turkey, according to the latest draft of the aviation package seen by EurActiv.

Signalling the importance attached to the situation by the EU authorities, the document adds that the European Commission is “considering new EU measures to address unfair practices from third countries and third country operators”, although it does not give further details at this stage.

EU officials told EurActiv that this draft is close to be the definitive one, although it could be subject to additional changes early next week, before the announcement next Wednesday (4 December).

The issue of subsidies to foreign carriers has become a source of concern for member states, especially for France and Germany, as well as MEPs. But in a debate in the European Parliament’s plenary, the Commissioner for Transport, Violeta Bulc, played down the impact of subsidies on the difficulties affecting the aviation sector in Europe. Bulc told MEPs that the use of “alleged” subsidies by Gulf airlines, and the related “negative consequences” in Europe still remain to be proven.

>>Read: MEPs call for strong action against subsidies for Gulf airlines

The package however clearly reflects this concern. EU officials explained that the document intends to balance the view of those who primarily focus on the “unfair” public support offered by third countries, and those who want to address this issue as part of a wider strategy to make the European airlines more competitive.

In light of the lack of an international legal framework to deal with unfair commercial practices, the communication stresses that “it is important and legitimate” to ensure “fair and sustainable competition” from third countries.

Moreover, the Commission acknowledges that protection from these practices is currently not seen as “effective” by the stakeholders.

Therefore, the executive will address the issue of the subsidies in the context of the negotiation of the EU comprehensive air transport agreements, the draft document says.

In addition, the text states that the institution will intensify “corresponding policy action” at the International Civil Aviation Organization level.

Next week, the European Commission will ask member states for the green light to start the negotiations of comprehensive agreements with China, the Association of Southeast Asian Nations (ASEAN), Turkey, Saudi Arabia, Bahrain, the UAE, Kuwait, Qatar, Oman, Mexico and Armenia.

Its priority is to reach an agreement with the UAE, where Bulc travelled earlier this month in her first mission abroad.

>>Read: Transport Commissioner starts long battle against Gulf aviation subsidies

As part of its strategy to ensure market access, based on a level playing field, the Commission will also adopt interpretative guidelines on the application of the 2008 Regulation on the ownership and control of EU airlines to bring more legal certainty for investors and airlines.

Turkish Airlines

Although most of the criticism has gone against the alleged subsidies given by Qatar and the UAE to their carriers, EU sources noted that Turkey represents “a bigger challenge for Europe than the Gulf countries”.

The country is in the process of concluding a third airport in Istanbul, a huge project expected to be the largest airport in the world, with an annual capacity of 150 million passengers.

Turkey is situated in an even more strategic area than the Gulf states, offering a direct link between East-West routes. From there, airlines can fly to every medium size city in Europe using fuel efficient regional commuter aircraft, such as the Boeing 737.

Meanwhile, Turkish Airlines, the country’s flag carrier, flies to numerous European cities, thanks to Ankara’s bilateral agreements with various member states. In Germany, a country reluctant to open up its airports to the Gulf airlines, the company flies to 14 airports, the country with the largest number of airports outside of Turkey.

According to EU officials, the public support received by Turkish airlines is comparable to Qatar and the UAE’s support for their respective airlines. However, Germany and France have largely ignored it, officials told EurActiv.

Berlin and Paris have been the most vocal protesters against the subsidies, due to the struggling situation of their national carriers, particularly Lufthansa and Air France.

The same sources pointed out that it would be “critical” for the success of the talks with the oil-rich monarchies that Lufthansa and Air France speed up their renovation efforts, currently facing internal hurdles.

Although the Commission will ask for the mandate to begin negotiations next week, the executive expects the ‘okay’ from the Council by March. It will be only the beginning of a period of “hard work”, EU officials concluded.

Background

The EU aviation sector directly employs between 1.4 million and 2 million people and supports between 4.8 million and 5.5 million jobs, according to different studies mentioned by the European Commission's draft document. The direct contribution of aviation to EU GDP is €110 billion, while the overall impact, including tourism, is as high as €510 billion.

The Commission acknowledges that several new airlines and airports have emerged, which are posing a new and considerable challenge for European hub airports and carriers.

The strategy identifies three key priorities:

  • Tapping into growth markets, by improving services, market access and investment oportunitites with third countries, whilst guaranteeing a level playing field;
  • Tackling limits to growth in the air and on the ground, by reducing capacity constrains and improving efficiency and connectivity;
  • Maintaining high EU safety and security standards, by shifting to a risk and performance based mindset.

The social dimension and the protection of workers' rights has been also underlined by the MEPs as one of the priorities that should be addressed by the upcoming strategy.  As it was already announced by Commissioner Bulc in the Parliament's plenary, the strategy leaves the central role to the social dialogue.

In parallel, the executive will consider whether some policy initiatives are needed to clarify the applicable law and competent courts for the employment contracts of mobile workers in the aviation sector.

Timeline

  • 4 December: European Commission announces aviation strategy, including a mandate to negotiate with Gulf countries and other regions.
  • March-April: Commission expects 'green-light' from the Council to launch negotiations with oil-rich monarchies.

Further Reading

  • European Parliament resolution on the upcoming aviation package (11 Nov. 2015).
  • European Pilots Association (ECA)´s position paper on the upcoming aviation strategy.