EU Builds Firewall to Safeguard Level Playing Field in Aviation

In aviation matters the EU seems to have been awoken from a long-lasting deep sleep. The dormant period ended last week with the Transport Committee member’s decision to amend the EU regulation 868/2004 valid for the past 14 years. With their voting, the old bill that has proven to be totally ineffective will end up in the waste basket once the European Council has approved the new aviation regulation which is scheduled to take place next autumn. “The 868/2004 regulation was a rather feeble attempt to prevent market distortions that missed its targets completely,” commented Markus Pieper, the Transport Committee’s Group Rapporteur of the European People’s Party (Conservatives) in a telephone conference with CargoForwarder Global.

The name of the game is take, not give
Aviation data strongly support his statement: For instance, from 2006 to 2016 the half-publicly-owned Turkish Airlines grew its capacity on routes between Istanbul and destinations in Germany by 116 percent. The new airport which is currently being built on the shores of the Black Sea is intended to become the world’s largest hub, bundling passenger and cargo flows between Europe and the Far East, thus siphoning away traffic from the EU on a large scale to up the load factor of the national carrier TK.

Unacceptable conditions
Furthermore, the highly-subsidized Gulf carriers, namely Qatar Airways, Etihad and Emirates provide another example of market distortion by consistently undercutting their EU peers’ air fares. A practice they are able to do, concludes the EU TRAN Committee, due to hidden state aid, low wages paid to their ground personnel at gateways such as Doha, Abu Dhabi or Dubai, strong financial support by government controlled banks when purchasing new aircraft to grow their fleets or no union representation to better the labour conditions of staff working at ground handling agents, airlines or airports in the Gulf region. The main target of this strategy is to gain market shares and grow the carrier’s global influence, no matter if they are loss-making or profitable. Deficiencies are compensated by their state owners. All these are unacceptable conditions from a European perspective, say the TRAN members.
But that’s not all. The EU also targets Chinese and Russian airlines that are directly or indirectly state aided, distorting competition on a global scale. In this context the Committee speaks of “predatory policies.”

EU sends watchdogs to the accused
With their new regulation these practices will be stopped, preventing further traffic shifts based on unfair competition at the cost of European airlines. Should new violations occur, the EU will start investigations, sending inspectors to the state authorities and airlines concerned. In case they refuse to open their books and exclude the external watchdogs from data access, the EU has some impactful torture tools. These include the limitation of traffic rights, financial penalties or even overflight bans.

Protecting, without being protectionist
However, delegate Markus Pieper emphasizes that alike counter measures are only meant as a last resort to safeguard a level playing field in aviation: “We are not afraid of competition in a free market - on the contrary,” he emphasizes. By adding to this that the EU’s economic growth will be hampered, causing losses of jobs in the aviation industry should the ongoing infringements not be prevented. He concludes: “That's why we need an aviation defense instrument that will protect without being protectionist, and should persuade and deter in first place rather than punish.”
In the voting, 72 percent of the 39-member comprising TRAN Committed approved the amendment, while some delegates representing countries located at the edge of the EU, namely Cyprus, Malta or Finland voted against the resolution. They fear the loss of connectivity should Gulf carriers, Turkish Airlines or other non-EU airlines stop serving them as countermeasure to traffic restrictions imposed by Brussels.

Heiner Siegmund