EU Builds Firewall to Protect Own Aviation Industry

The framework introduced 2004 by the European Union to safeguard fair competition in air transport has failed, says the Commission. Its tools are too vague, fuzzy and contradictory. Now, a fundamentally revised paper is circulating in Brussels, aimed at abolishing discriminatory practices in aviation and establishing a level playing field. There are strong signals by the leading political fractions of the EU Parliament that they will approve the EC bill. If so, it could provoke conflicts with state subsidized airlines and their governments.

Decisions on stricter aviation rules will be decided in the Berlaymont Building of the European Commission in Brussels  -  courtesy: EC
Decisions on stricter aviation rules will be decided in the Berlaymont Building of the European Commission in Brussels - courtesy: EC

Aviation is a strategically highly important sector seen by the vital contribution to the EU’s overall economy, supporting over five million jobs and contributing annually €300-plus billion, or 2.1 percent to the EU member states’ GDP. Unlike other industries that are of cyclical nature, the block’s aviation sector, including airlines, airports and manufacturers, is expected to grow steadily by around five percent per year in average until 2030, say forecasts.
But this is endangered, says the EU Commission. They speak of a growing threat jeopardizing the buoyant industry. In the view of the EU Commission, the aviation sector is increasingly threatened by state-subsidized airlines based in countries with totalitarian or authoritarian regimes. Although no names are mentioned in the now tabled amendment to the EU’s Regulation (EC) No 868/2004, if one reads between the lines, the contents of the bill resemble a protectionist sword, enabling the Brussels’ competition watchdogs to limit or even cut back traffic rights conceded to the Gulf carriers as well as some airlines domiciled in Central Asian countries.

Smart ‘divide et impera’ strategy
The EU's initiative is based on the finding that their current tools to prevent market distortions in aviation are too inconsistent and not necessarily transparent.
Largely a home-made problem. Because most EU member states signed bilateral traffic agreements with Qatar, the United Arab Emirates, Kazakhstan and others. An approach that reminds the old Roman’s ‘divide et impera’ policy, true to the motto: if you can’t beat the block sign individual treaties with its sub-entities.
A rather smart separation strategy favored by third countries for many years, with Brussels watching from the stands. This political passivity encouraged state-controlled and subsidized non-EU carriers to push large amounts of traffic into France, Italy, Germany, the Benelux countries and others, undercutting their local competitors’ prices in pax and cargo, gaining increasing market shares in the long run.  

Putting an end to unfair competition
Now the EU Commission has finally woken up. By pushing their intended firewall within the block’s legislative bodies forward for ultimately safeguarding competition in air transport, the EC watchdogs try to establish a level playing field in aviation, preventing state-financed carriers to further siphon off high numbers of passengers as well as air freight volumes originating in one of the block’s member states.
Once the 2004-Regulation has passed through the legislative bodies, Brussels will have a strong instrument to end this drainage process. This because a central new element contained in the proposed Regulation is action in cases of 'violation of applicable international obligations’. Rights vis-à-vis third countries, under agreements to which the Union is a party, cannot be exercised separately by individual member states, the EC’s paper reads.
It can be expected that the amended 2004 Regulation, once approved by the EU’s legislative bodies, becomes an effective legal instrument putting EU traffic strategies and decisions in first place, overruling existing bilateral agreements between the block’s member states and third countries.


The bilateral causa is still unresolved
Particularly this touchy topic was intensely discussed during the meeting of the EU Committee on Transport and Tourism, last Thursday in Brussels. Stated Markus Pieper, member of the Conservatives: “The Commission’s bill has been very positively assessed by us, but the intended instruments cannot lead to leaving peripheral EU regions unconnected to the world.” Similar pleas to harmonize existing bilateral agreements with the intended Amendment were made, among other speakers, by Pavel Telicka from the Liberal Fraction and Socialist delegate Gabriele Preuss. She added to this that the amended Regulation, once approved, is an effective instrument and strong political signal to stop unfair competition in aviation. “It puts the EU in a strong position, forcing third countries to think long and hard before risking a conflict with us.”
Addressing the EU Commission directly, Jacqueline Foster of the Conservative Party recommended a rapid implementation of the new rules. “The entire framework should become law within six months, at maximum 12 months,” she declared.
A review and evaluation of the EU-intended firewall blocking attempts of ‘Unfair Competition in Air Transportation’ will be carried out five years after entry into force.  

Heiner Siegmund

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