Commission working on law tackling unfair subsidies to non-EU airlines

Emirates Airbus A380

An Emirates Airlines A380 landing at Birmingham airport. [Martin Hartland/Flickr]

The European 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.

The debate on unfair competition from the Gulf carriers, such as Emirates, Etihad Airways and Qatar Airways, has been raging in Europe and the United States where several airlines and politicians claim they benefit from unfair state aid.

The EU’s current law granting protection against unfair subsidies and pricing practices from non-EU airlines is considered to be ineffective by industry and policymakers.

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

The Commission, the EU’s executive, is working on a new regulation that would protect European airlines in cases of unfair competition, such as discrimination of EU carriers and subsidies by foreign governments, according to a document seen by Reuters.

“On this basis, and pending the establishment of an international instrument, the Commission is of the opinion that there is a need for an effective EU defence instrument against unfair practices by third country airlines,” the document says.

The Commission is due to unveil a package of measures on Dec. 2 designed to boost the competitiveness of Europe’s flag carriers, hobbled by the rise of low-cost players such as Ryanair and easyJet, as well as Gulf carriers and the rise of Asia as a major air traffic hub.

The proposal on unfair competition is expected in 2016, two people familiar with the matter said.

The new law could cover a wider range of unfair practices than the current one and give the Commission more investigative powers to collect evidence in cases of alleged unfair competition, the document says.

It could also “reconsider” the burden of proof for the amount of evidence needed to open an investigation and introduce new sanctions, such as the restriction or suspension of traffic rights as a last resort.

The Commission has previously said it would address unfair competition concerns when it proposes a commercial aviation agreement with the Gulf region in December.

Violetta Bulc, the EU’s transport Commissioner, said she hopes to receive a mandate from EU member states in March or April next year to negotiate a comprehensive aviation agreement with Gulf countries. The agreement will also cover subsidies, Bulc told EURACTIV in an interview.

“For us, Gulf countries are a great opportunity for exports,” Bulc said, deploring the “hype” surrounding the subsidy issue. She pointed out that Gulf airlines are big investors in Europe and buy up 50% of Airbus A380 capacities. “It is important to continue developing with them a global understanding of development of aviation,” she said.

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

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

The Commission is also working on the development of a “fair competition clause” to be inserted in future aviation agreements.

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 Dec. 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

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