The European Union’s transport chief sought more leverage to fight alleged unfair subsidies to airlines based in the Persian Gulf in a bid to create a “level playing field” for EU flag carriers.
European Transport Commissioner Violeta Bulc asked EU governments for authority to negotiate aviation agreements with the six countries that belong to the Gulf Cooperation Council. Curbing any market-distorting aid to operators such as Emirates, Etihad Airways PJSC and Qatar Airways Ltd. would be a goal of the negotiations.
Bulc’s request is part of a European aviation package that also seeks deals with China, the Association of Southeast Asian Nations, Mexico, Turkey and Armenia; foresees guidelines on the control of EU airlines; and proposes a regulatory framework for the use of drones. The targeted accords with the Persian Gulf states are a priority because countries such as the United Arab Emirates have fast-growing aviation markets and the issue of subsidies in the GCC has become politically sensitive in Europe.
“While the additional connections provided by the Gulf airlines are welcome, there are concerns regarding the conditions under which they operate,” the European Commission said in a statement about the package on Monday in Brussels. “The right way forward” is “to bridge the interests of both sides by creating conditions that will allow further market development and growth based on common rules and transparency.”
The commission, the 28-nation EU’s regulatory arm, is preparing for a bigger battle over state aid to Gulf-based airlines after national governments in Europe joined European carriers such as Air France-KLM Group and Deutsche Lufthansa AG in raising the issue.
France and Germany voiced concerns about foreign subsidies earlier this year at an EU meeting where transport ministers debated global aviation competition. The chief executive officers of several European airlines, including Air France-KLM and Lufthansa, wrote a letter to Bulc in December 2014 urging her to step up efforts to tackle government support for Gulf rivals.
Total seats on scheduled flights between the EU and the GCC nations have more than tripled over the past decade to 39 million this year, the commission said on Monday. The UAE has more direct traffic with the EU than China, India and Japan combined, according to the commission.
Bulc said last month that she wanted EU governments to give her an “open and flexible” mandate by April to negotiate an aviation agreement with the GCC, which also includes Qatar, Saudi Arabia, Oman, Kuwait and Bahrain.
The aviation package presented on Monday also promises “interpretative guidelines” at a later stage on the enforcement of a 2008 European law requiring that EU states and/or nationals own more than 50 percent of any airline based in the bloc and “effectively control” it. Etihad Airways has a 49 percent stake in Alitalia SpA and a 29 percent holding in Air Berlin Plc.
In their letter to Bulc a year ago, the group of European airline CEOs also pressed her to ensure that foreign investments in EU-based airlines “strictly comply” with the 2008 legislation. In addition to the heads of Air France-KLM and Lufthansa, the letter was signed by the CEOs of Austrian Airlines AG, Brussels Airlines NV and Swiss International Air Lines.
The goal of the planned guidelines is “to bring more legal certainty for investors and airlines alike,” the commission said on Monday.
This article was written by Jonathan Stearns from Bloomberg and was legally licensed through the NewsCred publisher network.