Arabian Gulf airlines face EU review amid competition complaints

French and German representatives asked the European Union to address the subject of government subsidies during discussions over a commercial aviation agreement with the Gulf later this year.

Emirates president Tim Clark plans to fly to Washington to refute US carriers’ allegations of government subsidies to Arabian Gulf airlines. Tobias Schwarz / AFP

As the Emirates president, Tim Clark, plans to head out to Washington this month to hit back at allegations from US airlines of unfair competition from Arabian Gulf carriers, the European Commission has stepped into the row saying it will take up the issue on behalf of its aviation industry.

In a meeting of transport ministers from the European Union on Friday, the French and German representatives asked the commission to address the subject of government subsidies during discussions over a commercial aviation agreement with the Gulf later this year.

“European airlines are losing market share against the Gulf airlines, because of their unfair competitive practices, particularly because of the significant public subsidies and guarantees that they enjoy,” said the French transport minister, Alain Vidalies. He said that an extension of traffic rights given to foreign airlines in Europe should be accompanied by effective control of “the mode of operation of these airlines”.

Germany’s Lufthansa and Air France-KLM have in the past voiced criticism against their Gulf rivals. The German airline’s earnings tumbled last year,with a €55 million (Dh212m) net profit for 2014 down from €313m a year earlier. Lufthansa was hurt by a pilots’ strike that cost the company €62m in November and December alone.

Similarly, American carriers are looking to win changes to federal legislation on open skies policies.

In a 55-page report, three US airlines – American, Delta and United – accused Gulf carriers of using unfair business methods and prohibited financial subsidies to contravene the open skies rules that govern international aviation.

The report said: "Fuelled by massive government subsidies, state-owned Qatar Airways, Etihad Airways and Emirates are aiming to dominate global aviation by exploiting open skies policy … This threatens our US airline industry, airline jobs and the US economy."

Emirates said last week that it was “confident that it can debunk all those arguments quickly and robustly”.

It is putting together a team from its legal, strategic and financial departments to respond to the allegations, and Mr Clark is planning to fly to Washington to meet US transport officials and attempt to head off any changes to federal legislation.

A report from the US-UAE Business Council last year on the commercial aviation relationship between the two countries identified more than $16bn in benefits each year to the US, supporting more than 100,000 jobs and generating more than $1.6bn in taxes.

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