EU Seeking New Order On Airline Subsidies

The European Union is seeking tough powers to limit state subsidies to airlines as part of new commercial aviation agreements it wants to negotiate with several countries including the UAE and Qatar.

The EU’s executive arm, the European Commission, has drafted a “fair competition clause” that would give it the option of revoking traffic rights if a complaint is brought against an airline accused of receiving state subsidies.

The clause would be part of air transport agreement talks the executive arm wants to hold on behalf of EU member states with countries like the United Arab Emirates, Qatar, Kuwait, Turkey and others.

The document outlines what would be perceived as state support including protection from bankruptcy, provision of capital, tax relief and cross-subsidisation.

It also outlines a 30 day consulate period for disputes over allegations of unfair subsides and that if the talks fail the complaining country could suspend or revoke the accused airlines traffic rights and impose duties.

The argument over airline subsidies became increasingly politicised through 2015. Two of Europe’s largest carriers, Air France-KLM and Lufthansa, and major United States airlines accused Gulf counterparts Emirates, Etihad Airways and Qatar Airways of being unfairly subsidised, an allegation they refute.

In response to the Reuters report, Etihad warned against protectionism in Europe, arguing it would be damaging for the aviation sector. “We are confident that the EC and European governments understand that, if heeded, the self-serving calls for protectionism by a few will undermine Europe’s connectivity and competitiveness as well as robust choices for consumers in Europe and elsewhere,” an airline spokesperson told Gulf News by email.

Etihad, which has bought stakes in four European carriers, said it would work with Europe “to pursue the Commission’s strategy to enhance the cost-effectiveness and efficiency of Europe’s aviation infrastructure. We will also continue to promote consumer choice, connectivity, innovation, legal certainty and investment.”

Emirates declined to comment, while Qatar did not respond to a request for comment.

The Commission is seeking a mandate from the 28-member EU bloc to negotiate these agreements on their behalf. Currently, air transport agreement negotiations take place between the governments of the two countries involved.

Etihad, Emirates and Qatar have warned in the past against protectionism in Europe and also the United State that they argue ultimately hurts the flying public.