Violeta Bulc, the European commissioner for transport, is leading efforts to review the block’s aviation regulations to ensure the industry remains competitive and effectively provides services for passengers. Yesterday, the European Commission (EC) unveiled its new strategy for the sector, part of a broader package of proposed reforms. As well as recommending updates to the regulatory framework, the European Union (EU) is also pursuing negotiations with other countries on air transport agreements that will cover market access including addressing the allegations voiced by European airlines of unfair competition from Gulf carriers. The EU has a mandate to begin negotiations with the UAE, which it hopes to make a start on later this year. Ms Bulc explains to the The National some of the key issues the EU will focus on as part of its overhaul of the aviation sector.
Given the global aviation slowdown in the past year, what emphasis has the EU put on ensuring carriers can compete and grow in the current challenging environment in Europe with demand relatively soft?
The success of European aviation is based on open and connected markets. In the 1990s, we fully liberalised our market, which led to more connections, more choice and cheaper tickets. As a result, European aviation today represents 26 per cent of the world market. Given the strategic importance of this sector, we are presenting a series of new measures to further support open and connected aviation markets in Europe and beyond. This will allow Europeans to remain a leading force in international aviation, and well connected to fast-growing regions like the Gulf.
What is the aim of the EU in terms of providing a fair aviation package for non-European carriers?
The European Aviation market is one of the most open in the world, and non-European airlines are essential for Europe’s connectivity. Our main objective is to boost connectivity in Europe and foster competition between air carriers. Air connectivity is crucial to the European and global economy; it drives growth, jobs and trade. Our new measures will help to ensure that aviation continues to fully play its role as an enabler, connector and driver of domestic and global cooperation.
The chief executives of Air France-KLM, Lufthansa and other carriers in Europe sent a letter to the transport commissioner in December 2014, urging the EU to step up efforts to reign in Gulf rivals over allegations of unfair subsidies. In light of this lobbying, how can any package presented on aviation be fair to Gulf carriers?
I receive many letters from all transport stakeholders, which I really value as it allows me to gather many different views. However, I don’t make my policy decisions solely based on letters. The commission’s aviation strategy sets out our blueprint for the future of European aviation, and our new measures are part of this strategy. The Gulf countries are a key aviation partner for Europe. This is why we want to conclude new aviation agreements with all GCC countries. Europe relies heavily on Gulf airlines for their connectivity, which is not only good for our economy but also for our citizens. To further support our open and connected aviation policies, the commission is adopting a new tool to ensure all airlines can compete on the basis of equal opportunities and connectivity can be safeguarded. Let me be very clear, this is not a protectionist instrument. Neither is it directed at a group of airlines or countries. In the absence of international rules, European airlines may be subject to practices affecting competition. In the long run this could also affect the EU’s connectivity, impacting the union’s competitiveness and limiting the choices for travellers.
Gulf carriers have been accused by European rivals of taking government subsidies and unfair competition. However, no proof has been provided. Last year, European transport ministers insisted on a provision on financial transparency in the negotiating mandates. What has been the result of this in the outcome of discussions?
A year ago, the European countries gave me a mandate to negotiate new aviation agreements between Europe and a number of key partners, such as the UAE and Qatar. Let’s not forget that we are talking about an agreement involving two parties. We need to create a win-win situation for both sides, otherwise we will never finalise the agreement. That is why I firmly believe issues related to competition should be discussed in an open and constructive way, as part of these negotiations.
We have started negotiations with the Asean bloc, Turkey, Armenia and Qatar, where we have already made good progress. I am also looking forward to meeting the UAE Economy Minister [Sultan] Al Mansouri [who is also chairman of the General Civil Aviation Authority board] in the coming months, where we will discuss this issue and I hope we will be in a position to open negotiations with the UAE.
Total seats on scheduled flights between the EU and the six nations of the GCC have more than tripled over the past decade to 39 million in 2015, according to the EC. The UAE has more direct traffic with the EU than China, India and Japan combined. How will the aviation package address this increase in capacity between the UAE and Europe?
International connectivity has a direct impact on economic growth, mobility and job creation, which is why Europe is constantly looking for ways to improve market access. With our new initiatives, we are reiterating our willingness to conclude new aviation agreements with the Gulf countries and the UAE in particular. The UAE is among the most dynamic and fast growing aviation markets in the world. According to our estimates, the economic benefits of new aviation agreements with the GCC countries would amount to up to €8.4 billion (Dh34.68bn) over the first eight years of implementation, and the creation of up to 8,300 new jobs.
How will the package impact Open Skies agreements? How will it affect fifth freedom rights?
Traffic rights fall under the scope of aviation agreements. Our new measures do not touch traffic rights between the UAE and European countries. European countries have their own bilateral agreements in place. There are also a number of European aviation agreements in place, like with the United States or Canada, and we are actively trying to conclude new ones, notably with the Gulf countries.
In the aftermath of Alitalia moving into administration and the hunt for a buyer, it seems more important than ever to ensure Europe remains an attractive investment environment for aviation. How will the package ensure this?
Europe is one of the most dynamic and open markets when it comes to foreign investment into its airlines. European airlines operate in a very competitive global environment and they must be allowed to tap into new sources of investments to grow and thrive. In the meantime, the success of the European aviation market makes them increasingly interesting for investors and global investment funds. Today non-Europeans can own up to 49 per cent of European airlines, which is one of the most liberal regimes in the world. And yet, recent investments – such as the one of Etihad into Alitalia – triggered reviews because the current rules are not clear enough. So we are not proposing to relax the rules, but rather to clarify them. Investors need certainty, and if we show them how European rules work and how they are enforced, they will find it more attractive to invest in European airlines.
malrawi@thenational.ae
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