Europe having its own open-skies battle

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Etihad A380 at Heathrow
An Etihad Airways A380 jet at London Heathrow. Photo Credit: Shutterstock

Through much of 2015, the U.S. airline industry has been divided by a fight over whether Persian Gulf carriers Emirates, Etihad and Qatar should be sanctioned by the U.S. government for alleged violations of Open Skies agreements.

Now, it appears that same debate is about to be reignited in Europe.

On Dec. 2, the European Commission will put forward a comprehensive policy paper on aviation. Expected to be included in it, according to a commission source, is a request for an open mandate from EU member states to negotiate a Europe-wide Open Skies agreement with the Gulf nations, most notably Qatar and the United Arab Emirates.

But even if that request gets the expected approval, European negotiators will have to deal not only with the Gulf states and their airlines, but with deep divisions within the EU itself.

“Whether they will reach an agreement is anybody’s guess,” said Barry Humphreys, a former external affairs director for Virgin Atlantic who in May ended a six-year run as chairman of the British Air Transport Association, an industry trade group.

At issue in the European negotiations will be the same question of state subsidies that has spurred so much rancor this year in the U.S. The three largest U.S. airlines — Delta, American and United — assert that Emirates, Etihad and Qatar have received $42 billion in subsidies from their governments since 2004. If true, the subsidies would violate Open Skies agreements by giving them an unfair advantage in the international aviation market.

U.S. cargo carriers and smaller airlines, however, have strongly opposed the push by the legacy giants to block further expansion of the Gulf carriers’ U.S. routes, arguing that open competition is best for all.

The Gulf carriers deny that they have received government subsidies.

A similar debate has been playing out in Europe for at least a decade, Humphreys said, and the dividing lines are firmly established.

The Lufthansa Group and Air France/KLM want the European Commission to get tough on the Gulf carriers in an effort to end subsidies. Backing those airline groups are the German and French governments.

On the other hand, the International Airline Group (IAG), whose largest holdings are British Airways and Iberia, has questioned whether Emirates, Etihad and Qatar are even receiving subsidies. The U.K. already has liberal bilateral Open Skies agreements in place with the United Arab Emirates and Qatar, Humphreys said.

The significance of the Open Skies debate in Europe is amplified by the growth of the Gulf carriers, which saw their passenger count nearly double between 2008 and 2013.

But according to John Strickland, owner of the London-based airline industry analyst firm JLS Consulting, the Gulf carriers’ push into Europe has brought plenty of economic benefits. Emirates, for example, now runs direct flights from the medium-sized European cities Lyon, Glasgow and Newcastle to Dubai, something no European carrier even offers.

Meanwhile, British Airways and other carriers are competing with the Gulf airlines vigorously on routes out of Heathrow and other European hubs. Gulf carriers are increasing price competition as well as providing greater market access to regional cities, Strickland said.

In statements provided to Travel Weekly last week, neither Lufthansa nor IAG appeared to be backing away from their opposing positions on the Open Skies debate.

“Over the past decade, foreign state companies, with the support of billions of dollars and no home markets of their own, have used ‘open markets’ to take unilateral advantage of freedom,” Lufthansa said in an email that carefully avoided mentioning the Gulf carriers directly. “In the absence of international competition law/subsidy rules and with no WTO membership of aviation, no framework regulates anti-competitive behavior. This is contrary to the meaning of free competition, which always implies voluntary or compulsory fair play.”

IAG sounded a far different note.

“We support the full liberalization of the airline industry, and we are concerned that protectionist sentiment is increasing, notably in the U.S.,” the company wrote in its email.

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