EU Calls For Air Services Deal with Middle East

LONDON—The European Union is seeking far-reaching air traffic treaties with the Middle East countries that host some of the world’s fastest-growing airlines whose expansions are opposed by some U.S. and European carriers, it said Monday.

Air France​-KLM SA​ and ​ Deutsche ​Lufthansa ​AG ​argue that the Middle East carriers have benefited from state aid that has distorted competition. They have asked the EU to reset the competitive landscape with the group, which includes Etihad Airways. The argument over traffic rights has spread across the Atlantic, where U.S. carriers  Delta Air Lines, United Airlines and  American Airlines are also trying to arrest inroads from the Persian Gulf carriers.

The European Commission, ​the EU’s executive arm, ​said the airlines and airports in Persian Gulf states “are reshaping the global competitive pattern of aviation.”​Far-reaching agreements with the Gulf Cooperation Council states would create “conditions that will allow further market development and growth based on common rules and transparency,” the commission said.

The comprehensive agreements would address a range of issues, including labor practices and fair competition, EU Commissioner for Transport Violeta Bulc said. She shied away from backing accusations some of those airlines are being subsidized.

​On Monday, the commission presented a long-awaited aviation policy in which it said it would seek aviation accords with Turkey, China and other markets.

The EU could ease restrictions on foreign airline ownership as part of such agreements, Mr. Bulc said.

The EU limits foreign investors to a stake of no more than 49% in one of its airlines. New thresholds could be established through reciprocity agreements, she said, without spelling out details of what level of investment may be approved.

Ownership rules are a contentious issue. Some carriers are seeking the limit to be lifted to garner foreign investment or to enable greater consolidation to boost profits. Labor groups have resisted liberalization though, fearing job losses.

EU member states still have to give the commission a mandate to negotiate such far-reaching accords. The commission has been seeking to replace a history of bilateral accords between members states and foreign countries with EU-wide agreements that would yield greater flexibility for flights.

“European aviation is facing a number of challenges and today’s strategy sets out a comprehensive and ambitious action plan to keep the sector ahead of the curve,” EU Commissioner for Transport Violeta Bulc said.

The commission also pledged to improve the safety and efficiency of its air transport sector, which it said employs two million people in the EU.

The new policy drew criticism for its lack of specifics. A grouping of European carriers said they welcomed the policy identifying some of the challenges the industry faced but it lamented that the plan “stops short of proposing concrete measures to address these.”

The European Cockpit Association, which represents pilots, took issue with some safety measures the commission is proposing.

The European Union will hold an aviation summit next month where the commission is expecting feedback from stakeholders on its proposal as well as to help formulate more detailed implementation plans.

The commission’s new air transport policy also aims to strengthen Europe’s drone industry and give more powers to the Cologne-based European Aviation Safety Agency.

The safety agency is supposed to draft rules to allow safe drone operations without endangering commercial flights, the commission said.

Originally published on The Wall Street Journal