The Strategist

The European Commission to Get the Law After Gulf Airlines

12/07/2015 - 14:00

The European Commission is ready to soften their demands on the share of foreign investors in the European airlines in exchange for tighter controls on state subsidies. This should allow the regulator to check the Arab carriers, which have repeatedly been accused by market participants of violating the rules of fair competition.

Adrian Pingstone
Adrian Pingstone
According to the Financial Times, the European Commission is preparing to soften requirements for the distribution of investor shares in European airlines. Under the current law, the proportion of foreign investment in EU carriers may not exceed 49%. Now, this limit may be revised.

However, possible exemptions will focus strictly on an individual basis and at the government level. The latter condition is not accidental: in exchange, the European Commission ask countries outside the EU for a favor. They will have to submit data on state subsidies to their airlines, and provide the European regulators with additional capabilities to track state financial investments in airlines. Primarily, the rule is intended for carriers from the Persian Gulf. Etihad, Qatar Airways and Emirates has repeatedly been accused of receiving state aid and violation of market rules of fair competition. Indeed, at the beginning of this year, American Airlines, United Continental and Delta Air Lines urged the US government to break the current open skies agreements with the United Arab Emirates and Qatar. The heads of the three largest US carriers that Arab countries have invested in their airlines about $ 42 billion in the last ten years. Such an infusion turned regional carriers into worldwide market leaders. This practice, according to the American companies, violates the rules of fair competition. Large European groups such as Lufthansa and Air France-KLM voiced criticism of Gulf countries as well.

So far, the European Commission has refrained from direct accusations against Arab carriers, rather choosing "economic diplomacy." As stated by Violeta Bulc of the European Commissioner, "for the last time, it was a lot of discussions on this subject, yet honest and open talks would the best answer to all of this."


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