EU to Start Delicate Middle East, Asia Aviation Talks

BRUSSELS—The European Union is poised to kick off talks on far-reaching aviation agreements that will land its negotiators in between some fast-growing emerging-market airlines and those European and U.S. carriers opposing their expansion.

EU member states on Tuesday are set to grant the European Commission, the bloc’s executive arm, the exclusive mandate to negotiate deals with the United Arab Emirates, Qatar, Turkey and members of the Association of Southeast Asian Nations, or Asean. The accords would replace a patchwork of bilateral pacts governing commercial flights.

Airlines such as 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 balance with foreign state-owned airlines—including Emirates Airline, Qatar Airways and Etihad Airways—which they say have received €39 billion euros ($44 billion) in handouts between 2004 and 2014.

The Middle East airlines deny the charge.

“Some sort of equal playing field needs to be established so that we have open and fair competition,” EU Transport Commissioner Violeta Bulc said in an interview with The Wall Street Journal.

The argument over fair competition echoes one playing out across the Atlantic, where U.S. carriers Delta Air Lines Inc., United Airlines and American Airlines Group Inc. are also trying to find regulatory leverage to peg back the growth of the Middle Eastern airlines. The U.S. government has invited interested parties to make their case, collecting thousands of pages of evidence, but is yet act.

Ms. Bulc said the EU-level aviation agreements would give partner countries a “predictable, equal legal framework.” It also should spur growth. “Whenever we introduce a one-stop-shopping approach, it benefits both sides,” she said.

Middle East carriers are skeptical. The chief executives of Emirates Airline, the world’s largest by international traffic, and Qatar Airways last week signaled they oppose the EU trying to impose limits on their growth.

Tim Clark, president of Emirates which is the world’s largest by international traffic, said there was little sense for the U. A. E to agree to a new air services agreement that was more limiting than the bilateral deals with some EU’s member. Slovenia, Ms. Bulc’s home country, last week signed an aviation agreement with the U.A.E. giving airlines such as Emirates the right to fly there and pick up passengers and serve destinations beyond, he said.

EU officials argue the Middle East carriers would gain wider market access and growth opportunities by signing on to a new deal in return for commitments to compete fairly.

The EU hasn’t spelled out how fair competition would be judged. Ms. Bulc said the issue is one for negotiators to hammer out.

The EU could drop limits on foreign ownership in its airlines on a reciprocal basis. Those investments currently are capped a 49%. Qatar Airways is the largest investor in British Airways-parent International Consolidated Airlines Group SA with a stake of about 15%. Abu Dhabi-based Etihad is a shareholder in a number of European airlines including Alitalia and Air Berlin PLC.

Europeans for Fair Competition, a lobby group of some European pilot unions and airlines, says it want the commission to assure “a strong and comprehensive fair competition clause, as well as oversight and enforcement procedures in any future air-services agreement,” between the EU and Gulf states. One set of Issues that riles European carriers are the less onerous labor provisions in Persian Gulf countries.

The competition argument could be the biggest hurdle to successfully concluding negotiations.

Mr. Clark said that to “try to impose European standards on the rest of the world is a bit of an ask in my view.”

Ms. Bulc said she hopes to get some of the agreements, which would need to be ratified by EU member states, completed before 2019.

The talks with the members of Asean in addition to Turkey, Qatar and the U.A.E. are only as a first round, Ms. Bulc said. She hopes European members will eventually grant rights to negotiate with more countries, including Mexico and others in the Middle East.

Published on The Wall Street Journal.