The European Union has adopted a proposal to make laws which in straight forward language,  will be aimed at curbing the successes of the major Gulf region carriers, such as Emirates, Etihad and Qatar Airways, and protecting the likes of Air France KLM, Lufthansa, Iberia and Scandinavian from better funded and managed competitors with superior product offerings.

The statement, quoted in full at the end of this post, also anticipates the termination and renegotiation of existing air traffic treaties.

Once it is read for what it is, it is a seriously provocative and wide ranging statement of intent, and will likely be of material interest to the ACCC and Foreign Affairs and Trade for its scope, language and potential to influence the level of competition in air services between Australia and continental Europe and the UK.

It is also clearly aimed at the flag carriers of China, Singapore,  South Korea, Malaysia and Indonesia, all with carriers that are notably focused on maintaining, expanding or entering into participation in the broad European aviation market.

Emirates will be the proxy arm of Qantas in that market under the soon to be finally approved transfer of  Qantas coverage to the Dubai based airline giant. Etihad, based in neighboring Abu Dhabi, is already the proxy or code share partner and part owner of Virgin Australia, and Qatar Airways, which has ambitions to expand its Australian operations, has already started posting growth figures that eclipse those of the early years of EK.

The EU statement is unlikely to be well received in Airbus, whose success is underpinned by its major customers in the Gulf zone, and its strong position in its contest for world leadership in airliner design and production with Boeing throughout Asia.

Which is another way of saying that this is probably the best thing the EC has proposed doing, by way of kicking a massive own goal, for Boeing and the US aerospace industry.

On the other hand, the mood in US politics has been one of fierce resistance to the EU doing anything which amounts to legislating against the business activities of non-EU enterprises, as shown by America’s resolute refusal to accept the European attempt to impose an emissions surcharge on foreign carriers flying to Europe, which was recently withdrawn after fierce opposition by China and Russia, with the latter controlling the gas supplies that keep parts of Europe from being very cold every winter.

Emirates has already expressed willingness to enter into a business partnership with American Airlines, once it sorts out its finances,  and what AA wants no side of politics on Capitol Hill is going to oppose.

While the government relations teams in Qantas and Virgin Australia would not have been surprised by this next stage along the path to changing EU aviation laws, it looks like they will be busier sooner in the New Year than earlier thought.

These proposals were first circulated in industry circles last September, but were among a wide range of policy changes proposed for various industries. Their adoption was decided by the EC this month, and made it into mainstream European media this week.

The wheels of rule making grind slowly in the EU, but once in motion, are very hard to stop.


Brussels, 20 December 2012

Transport: EU adopts ambitious external aviation policy

Today, EU transport ministers adopted a comprehensive set of Council conclusions which will lay down the framework for an ambitious EU external aviation policy for the coming years.

Based on the European Commission’s recent Communication “The EU’s external aviation policy – addressing future challenges”i, the Council has called for stronger coordination, unity and solidarity at EU level and for a more robust EU external aviation policy in order to strengthen the competitiveness of the European aviation industry while supporting the interests of European consumers.

Global aviation is changing dramatically and Europe has been harder hit by the recession than many other regions. The actions proposed by the Commission and endorsed by the Council will help boost the international competitiveness of the EU’s aviation industry by opening negotiations with key partners to access new business opportunities in fast growing markets, developing new tools to fight unfair competition and creating the right regulatory conditions to stimulate investment.

Vice-President Siim Kallas, European Commissioner responsible for transport, said: “Aviation plays a crucial and strategic role in the European economy both in terms of jobs, growth and connectivity. The new framework that the Council adopted today represents a major step forward towards a fully coordinated EU external aviation policy. The Commission, EU Member States and industry have to work together in an increasingly concerted manner to meet the serious challenges facing the EU aviation sector in the global market place. An effective and early implementation of the new EU external aviation policy will make a significant contribution to enhancing the competitiveness of the EU aviation industry and to the recovery of the European economy.”

In its conclusions, the Council in particular:

·                    Considers that a tailored EU approach is now appropriate in relation to a number of key partners;

·                    Encourages the Commission to reach comprehensive EU-level agreements with all neighbouring countries by 2015;

·                    Welcomes the Commission’s intention to request an authorisation to open negotiations on comprehensive EU air transport agreements with Turkey and India;

·                    Welcomes the Commission’s intention to prepare a comprehensive roadmap for enhancing EU-Russia aviation relations once Russia respects its international commitments towards the EU in aviation to phase out royalties for overflying Siberia. An objective of the comprehensive roadmap would be a comprehensive EU-Russia air transport agreement;

·                    Acknowledges the Commission’s intention to engage in a dialogue with Gulf countries with a view to enhancing transparency and fair competition;

·                    Supports the Commission’s intention to present a proposal for a revision or replacement of Regulation 868/2004 concerning protection against subsidisation and unfair practices with the aim of developing a more effective instrument to safeguard open and fair competition. In the same spirit, the Council welcomes the Commission’s intention to develop a template for a “fair competition clause” for inclusion in air services agreements with partner countries;

·                    Invites ICAO, the International Civil Aviation Organization, to play a leading role in modernising the existing economic regulatory framework governing the global aviation market including in relation to liberalising market access and airline ownership and control while safeguarding fair competition.

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