Published On: Thu, Apr 5th, 2018

Update: Qatar – Curaçao open skies deal raises concerns in Europe

Qatar-AirwaysTHE HAGUE, DOHA - Qatar and the Netherlands concluded an open-skies agreement for flights between Qatar and Curaçao, allowing for unlimited air services between the two countries. There are currently no nonstop flights between Doha (or the Middle East) and Curaçao, and the agreement was brokered based on the “desire of the two parties to organize the air transport relationship between Curaçao and Qatar in a treaty to promote trade, tourism, and investment,” according to Sigrid Kaag, Dutch minister for foreign trade and development cooperation.

The Dutch parliament is expected to give its consent later this week, but several political parties in the country want guarantees from Kaag that the Qatar and Curaçao open skies excludes fifth-freedom rights that would permit Qatar Airways to operate from its home base to Curaçao via the Netherlands and pick up Dutch passengers. This would, they argue, cause damage to Dutch airlines and allow “a heavily subsidized airline like Qatar to take over part of the market share on these lucrative routes from, for example, KLM.”

The deal, despite its tiny size, is reigniting the difficult debate on the need for new fair competition rules across Europe. Major European airlines, notably Lufthansa and Air France-KLM, allege that Emirates, Qatar Airways, and Etihad Airways (the so-called super-connectors) are benefiting from billions of dollars in state-aid— an accusation the three super-connectors call baseless—and distort competition. The two groups backed the set-up of Airline Coordination Platform to explicitly lobby on strengthening EU-wide fair-competition rules, while International Airlines Group and smaller independent airlines or their government owners see no need to change the current Regulation 868.

The EU adopted these rules in 2004 in response to support by the U.S. government of its airlines in the aftermath of the 9/11 attacks. Europe’s major airlines never used 868 against their U.S. competitors, many of which now are protected by transatlantic joint ventures, but they found that the tool was ineffective to file complaints against the disrupters in the Gulf because they failed to provide evidence of alleged unfair competitive behavior.

The European Commission agreed to draft a proposal to revise fair competition rules under pressure from mainly France and Germany, though it vowed the new legislation would not be protectionist, not specifically target the Gulf carriers, and would address wider issues such as lack of access to prime-time slots at foreign airports or unlawful fees for overflight rights. In return, the two nations supported the Commission in its quest to get mandates to negotiate EU-level open skies with key trading partners in growth markets, including Qatar, ASEAN, the UAE, and Turkey.

Open-skies talks are ongoing with Qatar, ASEAN members, and Turkey. Turkey and the EU just had a fourth round of talks last month, and EU and Qatar negotiators are meeting for a fourth set of talks later this month.

The Transport Committee of the European Parliament (TRAN) last month voted to approve the Commission’s planned new rules to protect the bloc’s airlines from possible unfair competition from third countries and their airlines, but only after hardening the rules and handing the Parliament powers to get involved.

Under these proposed rules, Brussels could impose “provisional redressive measures”—such as fines or operational measures—on non-EU airlines and third-country entities even when investigations are still ongoing when there is a “threat of irreversible injury” to an EU airline.

For the members of the European Parliament (MEPs), a third-country entity includes joint ventures and alliances, although only when “exclusively composed of third-country air carriers.” In other words, joint ventures or an alliance that includes an EU airline would be exempted. China’s Hainan Airlines could thus potentially be treated differently than its counterpart China Eastern Airlines, which has a joint venture with Air France-KLM.

“We now have a strong instrument to protect our European airlines from discriminations and the international competition,” said Markus Pieper, the German center-right MEP who is steering the legislation through the European parliament. Carriers from “the Gulf region, Turkey, China, and Russia have strong state connections that can cause market distortions.”

The TRAN version and vote reflects effective lobbying from some powerful European airlines, a Brussels-based executive of an airline association indicated. However, the position is stirring up emotions and causing concern.

MEPs from the Eurosceptic European Conservatives and Reformists Group (ECR) slammed the vote of its fellow lawmakers as a move that could increase ticket prices for consumers, cost jobs, and send a protectionist message to partners around the globe. “Europe has a world-class aerospace industry providing thousands of high-skilled jobs, with customers around the globe," said ECR MEP Jacqueline Foster. "If the Commission starts cracking down on our trade partners unfairly, it jeopardizes those trade links, putting jobs at risk.”

Olivier Jankovec, director general of airport trade body ACI Europe, said allowing the European Commission “to impose sanctions on non-EU airlines even before alleged anti-competitive practices are duly documented, assessed, and established sends a worrying signal to our international trading partners and could end up having far-reaching negative impacts on the connectivity of our regions and on consumers.”

Meanwhile, EU member countries have not yet defined a common position on the updated 868. A sensitive issue remains whether the Commission would get the powers to limit or suspend countries’ traffic rights, which are regulated by bilateral agreements, a source close to the talks indicated.

EU rulemaking requires that the EP and member states each find a political agreement on the legislative proposal before so called trilogue meetings can commence. During these negotiations, Pieper and a representative of the council of the presidency of the EU will hammer out a text that is accepted by both sides.

Click here for the treaty between the Netherlands and Qatar

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