EU countries must learn from the pandemic-driven global aviation crisis. One important lesson is that the focus placed on internal market rules is crippling the competitiveness of our airlines, argues Pedro Nuno Santos.
Pedro Nuno Santos is the minister for infrastructure and housing of Portugal, which currently holds the rotating presidency of the Council of the EU.
The COVID-19 crisis had a profound and long-lasting impact on the aviation sector. Last year the activity index of the sector fell more than 50% and we saw our airline companies completely grounded during several months.
Fortunately, the EU authorities and all national governments acted quickly and in a coordinated manner, creating a temporary framework for state aid due to the impact of COVID-19. In a couple of months, the EU members were able to deploy several financial and economic instruments in order to give economic support to the aviation sector.
Nevertheless, several countries faced several hurdles to complete the aid package to the airlines under support, many of them rooted in rules embedded in EU competition law.
This happened at the same time other airlines, in countries outside the European Union – the example of the United States is well known – were being aided by states unencumbered by strict competition rules.
I believe there are lessons to be learnt from this crisis in aviation.
The first lesson is that we should use this flexible response in an exceptional moment like the one the sector is going through to rethink competition policy and state aid rules.
If the aviation sector is strategic for each of our member states’ economies, then its importance should give member states more room to intervene in a way that does not jeopardise this sector’s centrality to European economies.
The other lesson is that, when most of our policy efforts are concentrated in disciplining EU members and enforcing the functioning of the internal market, we end up putting European airlines in a situation of objective disadvantage vis-à-vis airlines from the rest of the world.
Because the aviation market is a global one – and many of the airlines in Europe that received state aid compete with other legacy carriers that fly to and from Europe to other continents – the fact that non-European countries are using monetary and budgetary policies in support of their airlines means that our rules concerning internal competition end up damaging the external competitiveness of our airlines and conceding EU market shares to non-European companies.
The aviation sector is strategic for European economies. It creates well-paid jobs, strengthens economic relations and fosters multicultural dialogue. Our airlines guarantee the connectivity between member states and the mobility of millions of workers and tourists.
These externalities are not totally captured in the financial balances of individual airlines and should not be regulated only by current European competition policies. We should discuss better how we can protect the positive externalities airlines produce, even if that leads us to rethink the way some competition rules work.
If the creation of the European internal market, with its competition state aid rules rules, was necessary in an initial stage of the European Union, today we need to focus ourselves in the competition the European economy faces from the rest of the world. And for that, we need competition and state aid rules that do not hinder the growth and resilience of European companies.