There are no international rules on airline competition. Fair competition is a particular challenge when airlines from foreign countries are subject to completely different regulatory, legal and social frameworks. Air service agreements constitute the only legal framework for fair competition.
In order to keep their national airlines competitive in a liberalized market, some governments may be tempted to lend support to their airlines through means that could deny the airlines of other states a fair and equal opportunity to compete. Over the past weeks, we have witnessed serious allegations over Qatar Airways, Etihad Airways and Emirates Airline, three large Middle-Eastern airlines which are owned by their respective governments of Qatar and the United Arab Emirates, for having received large subsidies since 2004. The subsidies make it hard for non-subsidized EU airlines to compete and also violate the spirit of the fair air service agreements, distort the international aviation market and simply give them unfair advantage.
Recently, the increasing commercial influence of non-European carriers (especially the ones from the Middle East) seems to have caused serious concerns in the EU about the impact on more established carriers and their business, and has given rise to efforts to strengthen regulation in the pursuit of a level playing field. The areas of competition concerns are not limited to overt subsidy and state aid to airlines, but also to cheap (airport) infrastructure, fuel and capital, excessive sixth freedom carriage and loose labor laws.
Despite the relatively strong international legal framework, working conditions in some airlines remain poor and workers’ rights continue to be violated by some employing airlines in spite of many conventions and labor laws that regulate the labor market in general. There are indications that labor standards are not fully applied in certain growing aviation markets.
To stop the trend towards unfair competition, concrete actions are required, ensuring a competitive level playing field for all EU and international carriers operating from EU airports. The Regulation (EC) 868/2004 has proven impracticable and a new instrument needs to be put in place that is better adapted to protect European interests against such unfair practices.
With this paper I shall explore what could be the remedy to the current problem, and how could we safeguard the principles of fair competition. A fundamental issue shall be the question of the tools best suited to address the concern. In that regard, the paper will consider amending the current Regulation or adopting a new Regulation replacing the current Regulation (EC) 868/2004, and also give a proposal for a regulatory arrangement in the form of a model clause in the air services agreements which EU states would use as an additional means to identify, prevent and eliminate anti-competitive abuse. As long as those clauses are not applied, and as long as foreign airlines do not abide by transparent financial and accountancy principles to ensure they are not state-supported, their traffic rights to the EU should be limited.
