Threat of turbulence for Gulf carriers over EU rules on state aid

European Commission signals it could apply rules to overseas carriers operating in EU

For two decades it has looked like the Persian Gulf carriers could do no wrong. Etihad, Emirates and Qatar Airways enjoyed years of double-figure growth as they cashed in a growing appetites for long-distance travel by channelling passengers going between East and West through their strategically-placed hubs.

However, this year they all seem to be hitting some turbulence. In January, Etihad announced that its powerful chief executive, Australian James Hogan, was stepping down. Many in the industry blamed poor investments such as the carrier's effective bailing out of the now broke Alitalia for the move.

Shortly before, it emerged that Emirates profits dipped sharply last year, prompting many to speculate that its growth story was at an end. Then last week, Qatar Airways, which appeared to be the most resilient of the three, was caught in the fallout as Gulf and Middle Eastern neighbours, including Bahrain, Saudi Arabia and Dubai, cut ties with its home country, Qatar.

Now a problem that could hit all three is looming ever closer. This week, the European Commission signalled it could extend state-aid rules to overseas carriers operating in the European Union. This would allow Brussels to sanction foreign airlines that receive aid from their home states, if that threatens the interests of one or more of the bloc's carriers.


This is direct response to pressure from the likes of Lufthansa and Air France KLM, which claim the Gulf carriers benefit from the support of the wealthy states that own them, giving them an unfair edge. However, the Gulf players all deny this, saying they have to operate commercially and received only equity, not direct aid, from their owners.

They also point out that, as Qatar Airways chief executive Akbar Al Baker told this newspaper a few weeks ago, Gulf airlines are big supporters of Airbus, a significant employer in both Germany and France.

The commission’s state-aid move looks like it runs counter to the spirit of open skies, the treaty that liberated aviation in the EU. However, if is introduced, it’s worth remembering that anyone making a complaint on foot of it will have to prove that an airline gets the aid in the first place and that it damages a European carrier in the second. That could be a tall order.