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28/09/2016

New European carriers association split over unfair subsidies

Transport

New European carriers association split over unfair subsidies

Lufthansa is among the companies in favour of a stronger response against Gulf carriers.

[Curimedia]

The largest European airlines will join forces on 20 January to address growing costs. But differences over how to face foreign rivals will impede a unified challenge to competition abroad.

The aviation sector has grown more competitive, as powerful carriers have emerged in Asia and the Persian Gulf. Meanwhile, European airlines face a still fragmented market, rising airport charges and, in some cases, unfinished modernisation processes.

The Lufthansa group, Air France-KLM, Easyjet, Ryanair and International Airlines Group (the holding company of British Airways, Iberia, Aer Lingus and Vueling) will create a new association in order to offer a “unified voice” on issues such as airport charges, air traffic management or taxation on passengers.

The companies will also offer common positions on topics such as emissions trading and passenger rights.

The ‘big five’ will set up its own lobbying organisation dealing with these issues, going head to head with the Association of European Airlines, which represents 22 European carriers.

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

However, the association will not deal with the hottest issue on the European carriers’ plate at the moment: fighting back against unfair practices by a number of foreign rivals, particularly from the Gulf countries.

“This is the only topic on which there is not a common understanding,” a spokesperson for the association told EurActiv.

As part of the new agreements to negotiate with Qatar, the United Arab Emirates and Turkey, the European Commission intends to address the alleged subsidies given to their national carriers.

The Commission is considering new EU measures to address “unfair practices from third countries and third country operators”, according to the aviation strategy announced last December.

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

Division among Gulf carriers

While the response to subsidies has divided European airlines and member states alike, with France and Germany championing the toughest stance, the Gulf airlines have shown different attitudes to the EU aviation strategy.

Dubai’s Emirates questioned whether the European Commission was acting consistently with state-owned carriers, funded by other nations, such as India, Pakistan and Sri Lanka operating in the EU, as well as with “anti-trust immunised joint ventures between European and non-European carriers and other protected commercial arrangements of this nature”.

However, Ethiad welcomed the aviation strategy.

“Etihad will continue to work constructively with the EU institutions to pursue the Commission’s proposed holistic strategy to enhance the cost-effectiveness and efficiency of Europe’s aviation infrastructure and to promote consumer choice, connectivity, innovation, legal certainty and investment,” the company said.

The European Commission expects to get the ‘green light’ from the Council this semester to kick off the negotiations with the oil-rich monarchies. However, officials warned that this issue is highly controversial, and there is only one scheduled Transport Council in June, during the current Dutch Presidency of the EU.

The Dutch Presidency intends to be “realistic and pragmatic”, but it does not expect to adopt any conclusions on this issue during its semester at the EU’s helm, a spokesperson said.

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

The first discussion on the aviation strategy will take place during the aviation summit to be held in Schiphol airport on 21 January. Member states and MEPs, together with other officials, are expected to discuss the future of the aviation sector, including the pillars of the aviation strategy itself.

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 to European hub airports and carriers.

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.

Timeline

  • 20 January: The CEOs of the largest European carriers present in Schiphol airport (Amsterdam) a new association, with Transport Commissioner Violeta Bulc.
  • 21 January: Aviation summit in Schiphol airport.

Further Reading

Association of European Airlines: Press release on last year's results.