News Column

EU Seeks More Competition Rules, Mergers to Save Airline Industry

Sept. 27, 2012

The European Union on Thursday launched a bid to tighten competition rules and favour transatlantic mergers in the aviation sector, warning that the bloc's industry is "under severe threat" by rivals in Asia and the Middle East.

"The European aviation industry has been hard hit by recession, and if that was not enough, global aviation is changing dramatically," said EU Transport Commissioner Siim Kallas. "We need to respond."

European airlines are expected to register a net loss of 1.1 billion dollars this year, according to the International Air Transport Association.

At the same time, demand is booming in other parts of the world, with the Asia-Pacific region expected to control a market share of 38 per cent of world traffic by 2030 - more than the United States - according to data from the EU's executive, the European Commission.

Brussels blames much of the European industry's troubles on low economic growth in the crisis-battered continent. But Kallas hopes to help by changing EU policies.

The proposal that is likely to prove the most controversial involves loosening restrictions on ownership and control over airlines, most notably in the United States.

Current constraints on airline mergers "deny carriers access to important sources of new capital," the commission said, pointing specifically to EU-US agreements to liberalize carrier ownership.

However, relations between Brussels and Washington on aviation are currently strained due to the EU's new carbon emissions scheme for airlines, which requires all carriers landing and taking off from EU nations to be liable for their carbon dioxide emissions.

Kallas is additionally proposing to develop new EU rules to ensure "fair competition" and "protect European interests against unfair practices." Though the commission did not give any names, observers theorized that Gulf airlines are of particular concern in this area.

The commission's plan also foresees the EU setting up more air-transport agreements with its neighbours, as well as "key and increasingly important aviation partners" across the world.

Such deals could generate 12 billion euros (15 billion dollars) in annual economic benefits, according to commission estimates.

The proposals would have to be approved by EU member states and the European Parliament to become law.

Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH

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