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05/12/2016

New airline alliance takes off, aims at airport costs

Transport

New airline alliance takes off, aims at airport costs

KLM Boeing 777

[Shutterstock]

In an unprecedented step, Europe’s five largest airline groups, including budget carriers EasyJet and Ryanair, launched a new alliance on Wednesday (20 January) to combat rising airport charges amid a fierce battle with Gulf rivals.

The new association, dubbed Airlines for Europe (A4E), brings together the budget airlines, Lufthansa, Air France-KLM and the International Airline Group, the parent company of both British Airways and Iberia.

The alliance will “represent the interests of its members when dealing with the EU institutions, international organisations and national governments on European aviation issues”, A4E said in a statement at its launch, at Amsterdam’s Schiphol airport.

‘Excessive airport charges’ and ‘unreasonable taxes’

In their first act, the five managing directors of the member airlines called for swift steps to stop European travellers being “fleeced by excessive airport charges” and for the removal of “unreasonable taxes”.

“Six months ago, we got together to agree that Europe needs a loud and unified and clear voice to represent the airline industry in order to bring changes to the EU aviation framework,” said Willie Walsh, chief executive of IAG.

The new association will “support and create jobs and support the interest of aviation in Europe,” he said.

European Transport Commissioner Violeta Bulc welcomed the move, saying: “Not only do we want a very strong internal (aviation) market… but we also want to ensure that European aviation stays a leading force in shaping global aviation.”

The alliance said it is demanding “a significant reduction” in the charges which are “paid by hundreds of millions of EU travellers”.

Citing a recent study, Air France-KLM chief Alexandre de Juniac revealed that airport charges at the largest 21 European airports had soared by 80% since 2005 even as the average price of airline tickets has fallen by about 20%.

“At the 10 largest airports the increase was even greater, close to 90%,” he said.

“These increases mean that passengers have had to pay an extra €5.4 billion in airport charges over the last 10 years.”

The airline bosses urged the “EU to take action lowering the cost of the EU’s airports by ensuring that monopoly airports are effectively regulated.”

Airport association ACI Europe rejected the call for more regulation.

“These airlines are building their unity on our back – as they are unable to come together on major strategic policy issues such as Open Skies, let alone foster wider aviation industry alignment. For them, airports are just scapegoats,” ACI Europe Director General Olivier Jankovec said.

“Their tired call for even more regulation of airports is just about boosting their profits – or supporting their own lack of competitiveness. There is absolutely nothing for the consumer with this agenda – let alone for Europe’s connectivity. The airlines are wilfully ignoring today’s market reality of ever-increasing airport competition.”

Taking aim at unions

The association is also taking aim at unions within the air traffic control sector, with Ryanair chief executive Michael O’Leary saying “we want to eliminate air trafic control strikes that affect thousands of passengers”.

“We expect to see action this year,” O’Leary said, adding the association believed that reform on airport directives will be implemented before the end of 2016.

O’Leary said rules should be drawn up to force disputing parties into arbitration before strike action, and that existing technology should be used to keep overflights running even if strikes do occur.

>>Read: Airline bosses call for fewer strikes, lower taxes

The launch of the new association comes on the eve of an EU Aviation Summit, being hosted by the Netherlands on Thursday (21 January) as part of its six-month presidency of the European Union.

No common ground on competition from Gulf carriers

It also follows European allegations that their Gulf rivals enjoy a competitive edge due to what they say is unfair financing from their energy-rich, deep-pocketed state owners.

But Europe’s largest airline bosses, whose businesses transport around 460 million passengers a year, remained coy on the issue of tackling rivals from the Gulf saying that it was an area of disagreement.

“Competition by the Gulf airlines wasn’t an area were we could find common ground,” Walsh told journalists.

>>Read: New European carriers association split over unfair subsidies

The new alliance also intends to push for a more reliable airspace by reducing the costs of air traffic control through the completion of the Single European Sky plan.

Launched in the late 1990s, the aim of the project is to make European skies more competitive, secure and environmentally friendly by eliminating national borders.

Background

Over the next 20 years, global air traffic growth is projected to increase at a rate of 5% a year, while air traffic in Europe will grow at a rate of 3.5%, according to the US aircraft maker Boeing. In 2014, the number of passengers travelling by air in the EU amounted to 849.4 million, an increase of 4.4 % compared with 2013 and of 16.9 % compared with 2009.

But despite this favourable environment, European airlines are expected to go through a period of consolidation in the coming years. The number of major airlines is still quite high compared to the US. Tough competition from low-cost carriers and and Middle Eastern airlines is expected to further support this consolidation. More than 20,000 job cuts have been implemented or scheduled by European airlines since 2012.

In December, the European Commission presented an aviation strategy for Europe to boost the competitiveness of the sector, strengthen European airlines, airports and the aeronautic industry, and ensure a level playing field in the global market, while setting out a long-term strategy for Europe’s aviation sector;

The new aviation 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.

>> Read: EU plans measures to even competition with non-EU airlines

Timeline

  • 20-21 January: Aviation summit at Amsterdam's Schiphol Airport.
  • 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