Friday, June 02, 2017

Europe to Toughen Airline Rules to Face Off Mideast Competition: Move comes as European and U.S. airlines complain they are undercut by Gulf rivals

The European Union will propose stricter rules on Thursday to allow the region’s airlines to challenge perceived unfair competition from overseas rivals.

The move comes after repeated complaints by European and U.S. airlines that major Middle Eastern carriers such as Emirates Airline, Qatar Airways and Etihad Airways have grabbed market share by using state subsidies to offer heavily discounted tickets. The three airlines deny the charge.

The European Commission—the EU’s executive wing—will unveil updates to its aviation policy that will allow member countries, airlines or the Commission itself to challenge unfair competition—prompted by charges that foreign carriers have exploited liberal EU rules. The bloc’s current aviation policy was first published in late 2015.

“The rules we had up to now were almost unusable,” EU Commissioner for Transport Violeta Bulc said in an interview.

“We will have for the first time clear rules in the toolbox in case things go wrong. I hope I will never need to use them,” she added separately.

U.S. carriers, including American Airlines Group Inc., Delta Air Lines Inc. and United Continental Holdings Inc., have lobbied the Trump administration to curb the growth of airlines from the Persian Gulf. Air France-KLM SA and Deutsche Lufthansa AG are among the European carriers who have made similar complaints to their national governments and to the Commission.

The EU’s response comes at a difficult time for Mideast airlines. Demand for air travel has been hit by low oil prices and a U.S. ban on the use of some electronics on inbound flights from some Middle East airports including Dubai, Doha, and Abu Dhabi.

Qatar’s flag carrier is under further pressure due to the move by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt to isolate the Qatari government. The U.A.E. closed all Qatar Airways offices in the country on Wednesday, one day after Saudi Arabia did the same. The countries have also blocked flights to and from Qatar.

The proposed EU legislation, which needs to be approved by the European Parliament and a body representing member states, comes as the bloc tries to negotiate far-reaching aviation agreements with countries such as the U.A.E. and Qatar, which would replace existing deals struck with individual EU states.

The Commission is also trying to clarify longstanding airline ownership-and-control rules that limit foreign ownership to 49%.

Foreign investment in European carriers, including Etihad’s 29.2% stake in Air Berlin PLC and a 49% holding in Alitalia before that airline entered bankruptcy protection, has raised questions over whether a minority owner may exerts control over decision making. Etihad has said it works closely with its partners while complying with EU rules.

EU member states are responsible for ensuring investments in their airlines comply with the ownership-and control-rules. The guidelines are intended to ensure all countries apply the same yardstick and potential investors know what power they have to shape the future of the airline they are buying into.

“We are trying to create legal certainty” for all, Ms. Bulc said, adding that the caps on foreign ownership of airlines wouldn’t be lifted.

The EU’s action comes at a pivotal time for Italy, which is seeking an investor to keep perennially unprofitable Alitalia flying. Alitalia has lost money for years amid high costs and growing competition from budget airlines.

Rome is in talks with potential investors that may take a stake in the airline and has pledged more than $600 million to keep the carrier airborne through the busy summer travel season.

Original article can be found here:

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