EU seeks new air traffic agreements in Gulf carrier battle

BY JULIA FIORETTI AND VICTORIA BRYAN
The European Commission is seeking a new European-wide air traffic agreement with Gulf states as a way of boosting European airlines against what some of them have termed unfair subsidies enjoyed by Middle East-based rivals.

Europe’s aviation industry, which contributes 110 billion euros ($119 billion) to EU gross domestic product, has been hit by the rapid expansion of Gulf airlines and shifting traffic flows to Asia.

The EU executive, in a package of proposals unveiled on Monday to boost the competitiveness of Europe’s aviation sector, asked national governments to give it a mandate to start talks on air transport agreements with a number of countries including China, Turkey, United Arab Emirates, Kuwait and Qatar.

Such agreements, at the moment often done on a bilateral basis between the governments of two countries, would set out where and how often foreign airlines could fly into the EU, and vice versa.

Some European legacy carriers, notably Lufthansa and Air France KLM, as well as major U.S. airlines, have accused Gulf carriers of receiving unfair state subsidies, allegations they have rejected.

The Commission said it would look to include fair competition provisions in upcoming traffic rights negotiations, and would also consider measures to address unfair practices outside the bloc, “as soon as possible in 2016.”

The head of European airports association ACI Europe, Olivier Jankovec, said Europe needed more “Open Skies,” or unrestricted traffic agreements, along the lines of what it has with the United States, but that clarity was still needed on what constituted “fair competition”.

“A level playing field is a misleading concept. The playing field will always be unlevel, for example, depending on the airline or airport’s geographic position,” Jankovec said.

Gulf airline Emirates [EMIRA.UL] said it welcomed any “reasonable and sensible” definition of fair competition rules.

“We would also be interested to see what such a policy would mean for state-supported airlines in Europe, as well as existing anti-trust immunized joint ventures between European and non-European carriers,” it said in a statement.

SUMMIT

The EU is due to hold an aviation summit in January at which it will discuss first responses to the package. On Monday, various associations welcomed the focus on aviation as a driver of economic growth, though they said it lacked details.

The Commission also said it planned to issue guidelines on the law on ownership and control of EU airlines, It said it would pursue a relaxation of the rules on ownership, which currently restrict foreign investors to a 49 percent stake in EU carriers, on the basis of reciprocity through bilateral aviation and trade agreements.

The Aviation Package further contained measures designed to improve connectivity in the 28-member bloc and tackle airports’ capacity constraints.

However, ACI Europe and regional airlines association ERA said the package did not do enough to address capacity constraints in Europe. ACI’s Jankovec said he had hoped for a proposal on introducing a pre-check system for frequent fliers, as used in the United States.

EU member states were also urged to complete the “Single European Sky” project, in process for a decade and which would cut costs and emissions by merging national air corridors.

Associations representing airlines, meanwhile, expressed disappointment the package did not include any concrete measures to encourage members to abolish national and local aviation taxes.

Originally published on Reuters.com