Exclusive: EU sharpens competition tools to face Gulf carrier challenge

Fri Feb 10, 2017 10:14am EST
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By Julia Fioretti

BRUSSELS (Reuters) - The European Commission is set to revamp a law enabling it to impose duties on non-EU airlines or suspend their flying rights if it finds they have harmed European airlines, as it seeks to counter rising competition from Gulf carriers.

In a draft proposal seen by Reuters, the European Union executive aims to guarantee fair competition between airlines in the bloc by tackling unfair business practices by foreign airlines and their governments which cannot be addressed through open skies agreements.

These include illegal government subsidies or favorable treatment when it comes to slot allocation, ground handling services, airport charges and refueling, among others.

The proposal is likely to stoke tensions between European legacy carriers - hit by increased competition on long-haul routes and shifting traffic flows to Asia - and the three major Middle Eastern airlines.

Qatar Airways, Emirates and Etihad Airways have faced accusations of receiving illegal state subsides, which they deny.

The Commission has come under heavy pressure from France and Germany as well as their flag carriers, Air France KLM (AIRF.PA: Quote) and Lufthansa (LHAG.DE: Quote), to do more to tackle the challenge posed by the Gulf airlines.

Lufthansa has started cooperating with Abu Dhabi-based Etihad. But the issue of unfair competition has not gone away, with Lufthansa CEO Carsten Spohr repeating last week that he rejected subsidies as he signed a catering deal and maintenance project with Etihad.

"It is not a secret that Lufthansa has always been and remains an opponent of state subsidies," he said at a press conference in Abu Dhabi.   Continued...

Vapour trails from a Lufthansa plane are seen in the sky over the ski resort of Val d'Isere, France, December 1, 2016. REUTERS/Christian Hartmann