EU to tackle airline competition with new rules

[June 08, 2017]  By Julia Fioretti

BRUSSELS (Reuters) - The European Union proposed new rules on Thursday to tackle alleged unfair competitive practices from foreign airlines as it seeks to ensure European carriers can fend off fierce competition from abroad.

The move comes after repeated complaints from some European airlines, notably Air France KLM <AIRF.PA> and Lufthansa <LHAG.DE>, about Gulf carriers receiving illegal government subsidies, charges Emirates, Qatar Airways and Etihad all deny.

The proposal, which needs to be approved by the European Parliament and EU member states before becoming law, would allow governments and airlines to submit complaints about discriminatory practices to the European Commission.

Should the Commission find that the practices of a third country or airline are causing injury, or threat of injury, to European airlines it will be able to impose financial duties or suspend services and rights of the overseas airline.

"We want to ensure that Europe remains a leader in international aviation, well connected to fast-growing markets, with efficient European skies," EU Transport Commissioner Violeta Bulc said in a statement.

The proposal does not envisage the suspension of traffic rights, however, and will not interfere with bilateral air services agreements between countries.

A plane of Germany's air carrier Lufthansa takes off at Fraport airport in Frankfurt, Germany, May 22, 2017. REUTERS/Kai Pfaffenbach

Several EU member states had been staunchly opposed to the new rules on the grounds they could harm bilateral deals and reduce connectivity in Europe. Many also saw it as a protectionist move to shield uncompetitive European carriers, something the Commission denies.

"In aviation there is never going to be a level playing field," an EU official said. "We're not here to protect those airlines if they have not put in place a good business model."

The Commission also published guidelines clarifying the application of EU ownership and control rules that limit non-EU investors' stakes in European airlines to 49 percent.

Investments by foreign airlines in recent years, such as Etihad's 29 percent stake in Air Berlin <AB1.DE>, have triggered suspicions that the control is actually being exercised by non-EU investors.

(Editing by David Clarke)

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