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This page is part of an ECA archive on Fair Competition.
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:
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:
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!
Safe, fast and affordable air travel is a common desire of any passenger. To achieve this, the legislator set the ground for the airlines to compete freely with each other. Nonetheless, while ‘competition’ has become the name of the game, “unfair” is the term that has started to creep in – to the detriment of the industry, its employees and the long-term future of the sector.
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