EU to tackle competition with new aviation strategy

Aviation Package aims to improve connectivity, tackle airports’ capacity constraints and charges and regulate the use of drones

The European Commission is considering new measures to tackle what it sees as unfair competition from non-EU airlines as part of a package of proposals unveiled on Monday designed to boost the competitiveness of Europe's aviation sector.

The Commission, the EU executive, also 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. The talks with the Gulf countries are likely to be fraught with difficulty since some European legacy carriers, notably Lufthansa and Air France KLM, accuse the Gulf airlines of receiving unfair state subsidies and have been pushing the Commission to address this in negotiations for air transport agreements. Emirates and Etihad reject the allegations.

The Aviation Package presented by Transport Commissioner Violeta Bulc and vice president in charge of the energy union, Maros Sefcovic, contains a wide range of measures designed to improve connectivity in the 28-member bloc, tackle airports’ capacity constraints and charges and regulate the use of drones. “It will keep European companies competitive, through new investment and business opportunities, allowing them to grow in a sustainable manner,” Bulc said in a statement.

Europe's aviation industry, which contributes €110 billion to the EU GDP, has been hit by the rapid expansion of the Gulf carriers and the rise of Asia as a major air traffic hub. Its legacy carriers have also suffered at the hands of European low-cost players such as Ryanair and easyJet. Business lobby group BusinessEurope said it wanted better implementation of previous packages to ensure coordination and management of European airspace.

“As a comparison, the United States controls the same amount of airspace, with more traffic, at almost half the cost,” it said, adding it wanted to see an international level playing field and better access to growing markets.”

The other countries with which the Commission wants to negotiate air transport agreements are Saudi Arabia, Bahrain, Oman, Mexico and the Association of Southeast Asian Nations.

Next year, the Commission plans to issue guidelines on the law on ownership and control of EU airlines to give legal certainty to investors and airlines. It will also "actively" pursue the relaxation of the rules on the basis of reciprocity through bilateral aviation and trade agreements. While the limit on foreign ownership of EU airlines is clearly capped at 49 per cent, there is less clarity on what constitutes effective control. Etihad, for example, owns 29 per cent of Germany's Air Berlin and 49 per cent of Alitalia. Reuters reported that the Commission would suggest loosening ownership rules on Nov. 5.

The executive will also tackle the issue of airlines employing lower-cost workers overseas to avoid high labour costs in Europe by issuing a guide on the applicable labour law and considering whether legal changes are needed.

Europe's third-biggest budget airline Norwegian Air has, for instance, circumvented Norway's labour laws by basing some of its crew and jets in countries such as Spain and Thailand, while Ryanair has come under fire in some countries for using pilots employed through agencies, rather than directly with the carrier. EU member states were 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.

The Commission estimates that fragmentation of European airspace costs at least €5 billion a year and up to 50 million tonnes of CO2 emissions.

Reuters