EU looks to impose stringent limits on public subsidies to airlines

The EU executive is looking for what is being referred to as a “fair competition clause” to be included in air transport agreements. Failure to comply to limits placed on airlines’ public subsidies would see the revocation of their traffic rights. The executive considers an unfair form of public subsidy will include protection against bankruptcy, tax relief, provision of capital and cross-subsidy.
In the event of a transgression the new clause will propose a 30-day period of consultation after which, if agreement cannot be reached, the complaining country(ies) would have the opportunity to either revoke or suspend that airline’s traffic rights, as well as imposing any appropriate duties.
Currently the European Commission is looking for a mandate from EU governments to commence talks on air transport agreements with Qatar, Kuwait, the UAE, Turkey and China. This is particularly pertinent bearing in mind recent accusations from certain US carriers, as well as Air France-KLM and Lufthansa, that a number of Gulf Carriers have been the recipients of advantageous state subsidies.
Part of the current problem stems from the fact that Gulf carriers have expanded dramatically in their size of operations, hitting the EU GDP of €110 billion (USD$125 billion), a figure which has also been affected by a shifting of traffic flows in the direction of Asia.
A commission spokesman confirmed that in relation to unfair practices taking place outwith the 28 members of the EU membership bloc, there was support for new measures to counteract unfair practises. According to the clause that the Commission wants inserted: “Each contracting party shall eliminate all forms of discrimination or unfair practices which would adversely affect the fair and equal opportunity of the airlines of the other contracting party to compete in providing air transport services.”
Where subsidies are concerned, the Commission is calling for total transparency, while within the clause they intend to class discriminatory access to airport services, a normal return on public funds and the offsetting of operational losses as unfair public subsidies.