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03/12/2016

EU plans measures to even competition with non-EU airlines

Transport

EU plans measures to even competition with non-EU airlines

Maros Sefcovic and Violeta Bulc

[European Commission]

The European Commission is considering new measures to tackle what it sees as unfair competition from non-EU airlines as part of a package of proposals unveiled on Monday (7 November) designed to boost the competitiveness of Europe’s aviation sector.

The Commission also asked national governments to give it a mandate to start talks on air transport agreements with a number of countries including China, Turkey, United Arab Emirates, Kuwait and Qatar.

The talks with the Gulf countries are likely to be fraught with difficulty since some European legacy carriers, notably Lufthansa and Air France KLM, accuse the Gulf airlines of receiving unfair state subsidies and have been pushing the Commission to address this in negotiations for air transport agreements.

Emirates and Etihad reject the allegations.

The Aviation Package presented by Transport Commissioner Violeta Bulc, and Vice-President in Charge of Energy Union, Maros Sefcovic, contains a wide range of measures designed to improve connectivity in the 28-member bloc, tackle airports’ capacity constraints and charges and regulate the use of drones.

“It will keep European companies competitive, through new investment and business opportunities, allowing them to grow in a sustainable manner,” Bulc said in a statement.

EurActiv has previously reported on the Commission’s legislative plans for the aviation sector.

>>Read: Commission mulls new measures against aviation subsidies from third countries

Europe’s aviation industry, which contributes €110 billion to the EU GDP, has been hit by the rapid expansion of the Gulf carriers and the rise of Asia as a major air traffic hub. Its legacy carriers have also suffered at the hands of European low-cost players such as Ryanair and easyJet.

“Aviation has been a European success story,” Sefcovic said during a press conference, citing cheaper and safer flights within Europe and the increase in new flight connections in recent years.

Sefcovic added that the Commission’s plans for the aviation sector would also give a boost to the EU’s goals to cut CO2 emissions.

The aviation strategy “fits very well with the COP21 agenda,” Sefcovic said.

“The EU must remain the leader in the transition to low carbon society whereas managing at the same time the future increased demand for air travel,” he added.

Business lobby group BusinessEurope said it wanted better implementation of previous packages to ensure coordination and management of European airspace.

“As a comparison, the United States controls the same amount of airspace, with more traffic, at almost half the cost,” it said, adding it wanted to see an international level playing field and better access to growing markets.”

The other countries with which the European Commission wants to negotiate air transport agreements are Saudi Arabia, Bahrain, Oman, Mexico and the Association of Southeast Asian Nations.

Next year, the Commission plans to issue guidelines on the law on ownership and control of EU airlines to give legal certainty to investors and airlines.

It will also “actively” pursue the relaxation of the rules on the basis of reciprocity through bilateral aviation and trade agreements.

While the limit on foreign ownership of EU airlines is clearly capped at 49%, there is less clarity on what constitutes effective control.

Etihad, for example, owns 29% of Germany’s Air Berlin and 49% of Alitalia.

Reuters reported on 5 November that the executive would suggest loosening ownership rules.

The executive will also tackle the issue of airlines employing lower-cost workers overseas to avoid high labour costs in Europe by issuing a guide on the applicable labour law and considering whether legal changes are needed.

Europe’s third-biggest budget airline Norwegian Air has, for instance, circumvented Norway’s labour laws by basing some of its crew and jets in countries such as Spain and Thailand, while Ryanair has come under fire in some countries for using pilots employed through agencies, rather than directly with the carrier.

EU member states were urged to complete the “Single European Sky” project, in process for a decade and which would cut costs and emissions by merging national air corridors.

The European Commission estimates that fragmentation of European airspace costs at least €5 billion a year and up to 50 million tonnes of CO2 emissions.

>>Read: Emirates urges caution on EU-level aviation agreement with Gulf countries

Positions

The European airspace user associations ? which includes the Association of European Airlines (AEA) and the European Low Fares Airline Association (ELFAA) among others: "To its credit, the Commission openly acknowledges that aviation is a key driver of economic growth, jobs, trade mobility and connectivity. However, the strategy lacks ambition and does not propose adequate measures to bolster the competitiveness of air operators - a vital sector in Europe. [...]

While the strategy review correctly identifies some of the significant challenges that Europe's aviation sector is currently facing in terms of the cost and provision of infrastructure (both on the ground and in the air), the integrity of the market, inefficiencies in the value chain and a burdensome regulatory framework (e.g. national and local aviation taxes, the intra-EU ETS), it stops short of proposing concrete measures to address these.

Olivier Jankovec, director general of European operations for the Airports Council International (ACI): "We need more open skies agreements beyond Europe. This is essential for airports to attract more air services, develop their route network and improve the connectivity of the communities they serve. Ultimately, this is also about avoiding the marginalisation of Europe and supporting its global hub positioning. Closing markets and resisting change has never been a successful business strategy - and it rarely does any good for consumers.”

British MEP Keith Taylor (Green): "The Commission's only concern seems to be boosting the profits of airlines and, as a result, it is failing to address the myriad of other problems associated with air transport. Instead of redesigning rules to the demands of the air industry, we should be looking to reduce the climate change impact, pollution, nuisance and health problems linked to the sector. Given air transport is one of the fastest growing sources of greenhouse gas emissions, it is also both ironic and cynical that the Commission is presenting these proposals during the COP21 UN climate talks in Paris. [...] Ultimately, the focus should be on shifting short distance flights to more sustainable modes of transport, such as rail, where there are scheduled alternative connections of less than 5 hours travelling time. Addressing some of the unfair advantages from which air transport benefits compared to other sectors would be a start to this end."

Dirk Polloczek, President of the European Cockpit Association (ECA), a pilot's trade union: “The Commission brings forward crucial proposals and clearly acknowledges the strategic value of aviation in Europe. This is good! But on a number of issues, we need to go further than describing what we already know. In particular, after years of consultations, it is time to make the – so far disregarded – Social Dimension an integral part of aviation policy. The Aviation Package clearly fails to do that and is highly disappointing in that respect.”

Concrete action is required on ‘atypical employment forms’, social dumping and ‘flags of convenience’. Given the limited take-up of these issues in the strategy, strengthening the social pillar will remain among ECA’s top priorities in 2016."

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

  • March-April: Commission expects 'green-light' from the Council to launch negotiations with oil-rich monarchies.
  • 2016: Commission legislative proposal to tackle unfair competition from non-EU airlines

Further Reading

European Commission

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