According to Reuters, the European Commission, strongly lobbied by theAirlines4Europe pact and the legacy carriers Lufthansa, IAG and AFKLM, is preparing a draft proposal to counter unfair competition coming from the Gulf carriers – Qatar Airways, Etihad, and Emirates. The regulation might cover measures against illegal government subsidies, favourable treatment, and advantageous airport charges among others. The consequences of this regulation for shippers, if adopted, can be enormous as extra duties are always paid by the end-customer – the shipper. Stripping flying rights, if imposed, may damage capacity and connections in the air cargo operations.
As it was mentioned, the goal of the draft proposal is to cover unfair competition in air cargo. But here come some controversies.
The core argument of the EU carriers is that the Gulf carriers receive “illegal” state funding. But in many cases, EU governments are the owner or the major shareholder of airports. Nothing stands in their way to invest in new facilities, yet a lot of them are lagging behind the Gulf and Asian facilities. For shippers, low prices and high quality facilities are very important. Many shippers have become dependent on the Gulf as a hub for air cargo due to its state of the art freighters, ground-handling services and air cargo facilities for pharma, perishables and high tech. These facilities, paid for by the Gulf states, do not make part of the unfair competition, that is just “government investing”.
Moreover, if the regulation includes measures against favorable treatment on slot allocation, ground handling services, airport charges and refueling of the Gulf carriers, even EU airlines themselves may be targeted for getting favours. So, to fulfill its aim for true fair competition, the regulation should apply to all carriers, not just non-EU airlines.
There is a loophole in this legislation proposal draft. It has an exemption line stating that the Commission will not adopt these repressive measures if their impact on EU citizens or interested parties (in other words: air cargo) “would be negative and clearly disproportionate compared to any advantages given to the Union air carrier(s) concerned”. The exemption is almost as big as the entire regulation itself. Lawyers on both sides will be working very hard to prove or disprove the impact of the extra duty or stripping of rights. Furthermore, it talks about advantages given to Union Carriers. This is odd because the EU should be fighting for a level playing field. Advantages are conflicting with this goal.
The timing of this legislation piece is worrisome. Such regulation, if adopted, could call for ‘Quid pro Quo’. If the EU slams non-EU airlines, non-EU countries are bound to slam EU-airlines with the same type of measurements. It seems, while in 2016 we were still discussing free trade deals, 2017 is all about Brexit, Trump and protectionist measures.
The European Shippers’ Council (ESC) has been trying to get in touch with the European Commission to get more clarifications on the draft proposal though, so far, without success. But ESC will follow the developments of this policy issue very closely. Where the EU is creating a durable and healthy air cargo market, by tackling illegal state-aid, we will support it. However, it is a two-way street, no favours for non-EU airlines means no favours for EU airlines, and investment in air cargo infrastructure is a choice, not something illegal.
For more information, please contact ESC Policy Manager in Air Transport Rogier Spoel at: r.spoel@evofenedex.nl.