Brussels, 07/03/2002 (Agence Europe) - the European Commission could adopt an anti-subsidy" regulation next week, destined to protect European airlines from the predatory practices of subsidised airlines from third countries. The ruling on the most recent divergences between Commission transport and trade services is expected on Thursday.
The Regulation should allow the Community to take action against third country airlines that use state subsidies or their public company status to employ injurious pricing. Only journeys from the EU in which European companies compete with the countries targeted, will be affected. The commission can open an investigation on the basis of a complaint from the industry or on its own initiative.
This proposal is based on the anti-subsidy model in the products sector and the regulation of uncompetitive practices in maritime transport. It will examine the World Trade organisation's definition of "subsidies" and "counter measures". The WTO does not, however, cover the airline sector. The draft of the document to be studied outlines that the regulation will not replace the existing agreements with airline companies from third companies but will indicate that existing bilateral agreements do not generally incorporate regulation instruments for resolving differences or offering suitable solutions.
The document also points out that the USA has a number of instruments that enables it to take action against anti-competitive practices in the airline sector through Section 41310 of the US trade code.
This regulation had been envisaged by the Commission in its Communication on 10 October 2001 on the aftermath of the attacks of 11 September on air transport and has been taking shape since December (see EUROPE 8 December). Several European airlines have made official complaints against the practices of US airlines, which have lowered their prices, thanks to an aid package of some USD 15 billion by the US State. They also affect Swiss Air, which has benefited from 1 billion Swiss francs from the Swiss authorities for dumping cut-rice tickets. The Commission has, nevertheless, requested companies to provide proof of uncompetitive practices, before planning any action. the Draft regulation will at least provide a legal instrument with which to react.
The Lufthansa Vice President for European Affairs, Thomas Kropp, considers that, "a European instrument is more useful than airlines not covered by the WTO procedures. Conflicts in the airline sector can not be the object of a regulation for disputes like that of steel. There are competition rules for airline companies within the EU, but not vis-à-vis the exterior". Mr Kropp considers that the case of the Swiss Air company is typical of the problems encountered by the European industry. He pointed out that aid to Swiss Air had been announced last week to the tune of 3 billion Swiss francs, financed mainly by the state, which will allow the company to lower its prices by 20% over the next 15 months. Companies adjoining Switzerland, like Lufthansa, Air France and Alitalia must be able to defend themselves, he said. Mr Kropp added that the case of US companies was less worrying. Mr Kropp believes that the situation in 2002 has stabilised, following the aid provided in the crisis after 11 September.