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

Emirates Airbus A380

Since 1990, the number of passenger flights quadrupled, to 4.2 billion a year worldwide, utterly nullifying any gains in efficiency. By 2037 that figure will rise to 8 billion, writes Jonathan Gornall. [wilco737/Flickr]

Emirates airlines fears that its flying rights could be frozen if the European Commission is allowed to use aviation negotiations with Persian Gulf countries as a way to challenge state subsidies to Gulf carriers.

The Commission is expected to ask member states for a mandate to start talks on flying agreements with the Gulf countries and others such as China and Turkey when it presents an aviation package in December.

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

However, some European countries, notably France and Germany, have pushed the executive to use a commercial aviation agreement with the Gulf countries as a way to tackle alleged subsidies to carriers like Emirates, Etihad Airways and Qatar Airways.

The debate on unfair competition from the Gulf carriers has been raging in both Europe and the United States, where several airlines are campaigning to persuade Washington to alter commercial flying arrangements with Qatar and the United Arab Emirates.

In a letter to Hungary, the company’s President Timothy Clark says handing power to the European Commission to initiate talks “on the wrong terms” would undermine connectivity and tourism growth in Europe.

“It has come to our attention that there has been growing pressure on the European Commission from the French and German Transport Ministers to ensure conditions are virtually impossible for all sides to adhere to, thereby freezing Emirates’ flying rights as long as any negotiations are ongoing,” the letter says.

Emirates sent letters to governments in its major markets in Europe.

Germany’s Lufthansa and France’s Air France KLM have spoken out against what they see as unfair competition from the Gulf carriers.

Emirates has firmly denied receiving subsidies.

In the letter, Clark says Emirates has been profitable for the last 27 years and supported 85,100 jobs across the EU in 2013-14.

“Rather than receive subsidies as erroneously alleged, Emirates has in fact paid its state shareholder over $3.363 billion in dividends up to and including its 2014-15 financial year.”

>>Read: Gulf airlines hit back at European competition complaints

The Commission is working on a legislative proposal to tackle unfair competition from non-EU airlines which could include the ability to suspend air traffic rights, according to a document seen by Reuters.

It is also developing a “fair competition” clause to be inserted in commercial flying agreements with non-EU countries.

A spokesman for the European Commission said fair competition would be addressed as part of the “comprehensive agreements the Commission aims to discuss with several countries.”

“The need to ensure a level playing field when liberalising is widely recognised internationally,” said Jakub Adamowicz.

An Emirates spokeswoman said the airline remained committed to developing its European operations and regularly engages with governments on various matters, but declined to elaborate on details of specific communications.

Gulf carriers compete with Europe’s airlines on international flights but the subsidies they receive create distortions in the market, denting the competitiveness of EU and US carriers, critics say.

Qatar, Saudi Arabia, and United Arab Emirates airlines have received €39 billion in state aid from their governments since 2004, according to a study compiled for the big three US airlines: American, Delta, and United.

France and Germany complained about the situation at a meeting of EU transport ministers in Brussels on 13 March, saying “European airlines are losing market share against the Gulf companies, because of their unfair competitive practices, and in particular because of the significant public subsidies and guarantees they enjoy.”

Paris and Berlin called on the European Commission to end such practices by adopting a common strategy on controlling foreign airlines’ operations with traffic rights in the EU.

The EU's Transport Commissioner Violeta Bulc said she will seek a new mandate from EU countries to reopen talks with Persian Gulf states about market-distorting state aid to airlines.

She said the Commission will look not into state aid in Persian Gulf states, but also in countries like China, Brazil, and Turkey.

>>Read: Commission to review competition from Gulf-based airlines

  • 2 December 2015: EU Commission to publish aviation package
  • March-April 2016: EU Council expected to approve mandate for Commission to negotiate aviation agreement with Gulf countries
  • 2016: Commission legislative proposal to tackle unfair competition from non-EU airlines

Subscribe to our newsletters