Fair Competition in aviation is a must!

Gulf carriers distorting competition Fair competition brochure
Unfair competition in Europe Media & news
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Safe, comfortable and affordable air travel is a common desire of passengers and crews alike. This is why having airlines to compete freely with each other, based on the best product, quality service and price is a welcome and necessary precondition for aviation. But to grow, connect people and create jobs, Europe’s airlines should compete on a level playing field with a common set of rules.

 

However, this competition is on the point of turning into a ‘race to the bottom’. Airlines are increasingly seeking unfair advantage through market-distorting business practices,such as social dumping and “forum shopping” to benefit from light regulation and favorable taxation in countries that serve them as ‘flag of convenience’. This, in turn, puts pressure on other companies to use similar practices to safeguard their market share.

 

 

Gulf carriers distorting competition

 

This situation is exacerbated by ‘booming’ airlines from the Gulf region – notably Emirates, Qatar Airways and Etihad Airways – expanding their capacity on many of the routes previously serviced by European carriers. As a consequence, European airlines are not only losing market share, they are losing entire markets while the Gulf carriers are not creating additional demand. The problem is that many of these airlines are (partly) state-owned, supported by state aid, benefitting from access to cheap (airport) infrastructure, fuel and capital. European airlines can compete with Middle Eastern airlines; however, it is an entirely different thing to compete with Middle Eastern governments that heavily subsidise their state-owned airlines for strategic geo-economic reasons.

 

 

The Gulf’s success is based on the combination of at least two anti-competitive strategies:

  • Dumping capacity on the market: launching or increasing capacity on unprofitable, unsustainable routes, ‘inundating’ it and destroying competitors, subsequently absorbing capacity to eventually be able to set prices and control the market.
  • Acquiring equity in EU airlines to circumvent the EU rules on market access (‘Trojan Horse’ strategy) and to expand their network both within Europe and beyond (e.g. notably towards the US, incl. through Fifth Freedom rights).

In addition, Gulf airlines are not subject to measures such as night-curfews at airports (noise restrictions), ticket taxes and environmental charges as their European competitors. This hinders the ‘level playing field’ even further.

The state-sponsored rapid expansion of Persian Gulf carriers has harmed the competitiveness of Europe’s aviation, and will continue to do so, if not contained. The European Commission has received a mandate to negotiate a comprehensive air transport agreements with Qatar and with the United Arab Emirates. Through these agreements Gulf airlines could receive an opportunity for growth and expansion in return for a commitment to compete fairly. In 2016, ECA joined a coalition of aviation stakeholders ‘Europeans for Fair Competition’ (E4FC) and actively raises awareness about the damaging effect of Gulf airlines on European aviation, and the need to restore fair competition.
 

Unfair competition in Europe

In Europe, a new industry trend to distort competition is emerging: complex, in-transparent “innovative” business models and contractual set-ups. This includes: 

  • airlines arbitrarily relocating their business (i.e. their operating license and Air Operator Certificate) to ‘flags of convenience’ countries. The aim is to avoid tax and social security contributions for their employees, and/or to benefit from lax safety oversight by the authorities that offer their ‘flag’;Unfair competition in Europe
  • airlines using flexible contractual set-ups that are often at the edge of what is legal and what is necessary to guarantee flight safety. These set-ups force employees into temporary contract relationships, fake self-employment (e.g. requiring air crew to set up their own limited liability company that offers its services though agencies to the airline), and/or making use of fake work bases in non-European countries, and ‘pay to fly’ (P2F) schemes (whereby newly graduated pilots have to pay their airline for gaining flying experience on an aircraft).
  • At the same time, certain airlines are seeking direct or indirect subsidies from airports (e.g. lower airport changes), from local authorities (e.g. a fixed euro amount per passenger transported to their region) and/or from national government bodies (e.g. Gulf country governments helping their carriers to gain international market share). This allows them to unfairly cross-subsidise their operations and ticket prices – to the detriment of their non-subsidised competitors.

Europe must safeguard the principles of fair competition, before ‘honest players’ are pushed out of the market and governments lose control.

What can be done!

Promote fair competition by stopping abusive business models, social dumping, subsidy-hunting, and regulatory ‘forum shopping’;

Eradicate fake self-employment, zero-hours contracts and Pay-to-fly schemes used by certain airline operators;                                                                                                       

Ensure a competitive level playing field with 3rd country airlines.

Unfair competition aviation must stop

Fair Competition Brochure

Download the ECA Publication "The case for fair competition in Europe's aviation"

Media & News

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