Published on May 15th, 2016 | by Jim Lee0
European Crews join coalition for Fair Competition in Aviation
The European Cabin Crew Association (EurECCA) is a European organisation based in Belgium, which was founded in Brussels in 2014 and represents more than 35,000 cabin crew. It is made up of cabin crew unions from European Union Member States, as well as accession states and bordering states. Seven European unions were the founders of the EurECCA, these being; SNPNC et UNSA PNC (France), UFO (Germany), VNC (Netherlands), STAVLA (Spain), ANPAC (Italy) and SNPVAC (Portugal). They were subsequently joined by Kapers in Switzerland and IMPACT in Ireland. EurECCA´s main aim is to be recognised as a European social partner and, in this capacity, to be regularly consulted within the framework of the social dialogue, at the European level.
The organisation has no political connections; it concentrates on the interest of flight attendants speaking for more than 70% of organised cabin crew. EurECCA promotes better living and work conditions and part of its mission is to fight for the well developed European social model, and to improve general living and work conditions, for its members in the European framework.
EurECCA also offers a platform for exchanging information and for coordinating transnational tasks on working and pay conditions, and accordingly it concentrates on different policies, such as Flight Time Limitation (FTL), European cabin crew license, working contracts as well as occupational health and safety matters.
It will come as no surprise therefore, that EurECCA has decided to join ’Europeans for Fair Competition’ (E4FC), a coalition of different stakeholders from the airline industry, who are concerned about how what they describe as, “illegal aviation subsidies” from two Middle Eastern nations, are distorting the marketplace in Europe, threatening EU jobs and the larger EU economy. They advocate for the restoration of a level playing field in competition, between European Airlines and Gulf carriers.
In a statement announcing that they were joining E4FC, EurECCA say that the European airline industry has undergone a dramatic change in the past ten years or so. “New players, mainly from the so-called Gulf countries, e.g. Emirates, Etihad from the UAE and Qatar Airways from Qatar have built up immense capacity to bring passenger traffic to the three airports and from there, as the incoming market is relatively small, connect them with the rest of the world (hub-system)”.
Its statement goes on; “Although this being not a new phenomenon, as the main European carriers operate mainly under the same business model, there is a fundamental difference: Gulf carriers are state-sponsored as the airline industry serves as a fundamental strategical asset to develop a certain role in world business and politics. This strategic decision leads to state support, cheap airport infrastructure, a joint airline/airport strategy and cheap access to fuel and capital”.
This it adds “aims directly to the European aviation industry, as substantial traffic growth is not happening any longer in Europe. In Europe, airlines and their employees pay the prize. The price- dumping to sell the ongoing growing capacity leads to growing pressure on the financial situation of the European airlines. Through this, the situation of aviation employees is hardening immensely”.
The statement concludes; “There is a surprising lack of interest among European governments and the EU institutions to where this current development may lead”.
Separately, the European Cockpit Association (ECA), representing over 38.000 European pilots, has announced its support for E4FC. The ECA was created in 1991 and is the representative body of European pilots at European Union (EU) level, from the National pilot Associations in 37 European states. In addition, ECA has also two Associate Members from outside the European region. Its mission is to represent “the collective interests of its Member Associations at European level, striving for the highest levels of aviation safety and fostering social rights and quality employment for pilots in Europe.” The ECA is a recognised Social Partner in the EU’s Sectoral Social Dialogue. This allows it to develop – jointly with European employers’ organisations – common positions, recommendations and agreements that can have legally binding effect throughout the EU.
In a comment, ECA President Dirk Polloczek, said that “everyone should be bound to play by the same rules”. He added that it is no surprise that cash-rich airlines in the Middle East, can “afford to easily finance their excessive and detrimental growth strategy”. “Europe needs to take urgent action and stop this to safeguard the future of our industry and the employment it generates in Europe” he concluded.
How E4FC believes that Gulf carriers are distorting competition
E4FC points out that European airlines follow strict competition rules, as per European Commission guidelines. However, it claims that three Gulf carriers “have received massive aid – over €39 billion in subsidies- from their governments over the past 10 years”. This it claims has resulted in huge, artificial, and unfair advantages.
In support of these claims, it says that Etihad Airways has, since it was founded in mid-2003, received more than €16 billion in subsidies from the government of Abu Dhabi (UAE), including “€7.9 billion in ‘loans’ and ‘shareholder advances’ that have no repayment obligations and €6.4 billion in reduced interest payments from government loan guarantees. Indeed, in 2014 alone, Etihad Airways received €2.3 billion in capital injections from their government”.
It points out that the World Trade Organisation (WTO), which deals with the global rules of trade between nations, defines a subsidy as where:-
(i) A government practice involves a direct transfer of funds (e.g. grants, loans, and equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees);
(ii) Government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits;
(iii) A government provides goods or services other than general infrastructure, or purchases goods;
(iv) a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments.
Looking at Qatar Airways, E4FC claim that it has also been provided with more than €16 billion from the government of Qatar, over the past 10 years. It adds “In fact, in 2009 Qatar Airways shareholders considered dissolving the airline as it had accumulated losses that exceeded 50% of its share capital. Without government subsidies, Qatar Airways would not exist”.
Finally, in relation to Emirates Airlines, E4FC notes it has received over €5.6 billion in subsidies from their home government of Dubai (UAE). “These subsidies include debt assumption from fuel hedging losses and government subsidised airport infrastructure”.
The impact on European airlines, their customers and employees
As a result of this aid, E4FC say that European airlines and their employees are losing market share, on routes that were once profitable, as Gulf carriers expand into regions, regardless of market demand and flood routes with excess seats at artificially low prices. “It has become impossible to compete fairly for customers on such routes” it claims, and as a result, European airlines have to withdraw from routes they once served and forgo job growth. This it believes is detrimental to the European aviation industry and its workers. The European aviation industry supports over seven million jobs – seven million workers who could lose their jobs “as a result of unfairly subsidised competition”.
Without competitive fares, it stands to reason that there will be significantly fewer airlines, leaving travellers with less choice and prices not determined by healthy competition, not to mention significantly less non-stop access to destinations both at home and globally.
E4FC say that this is particularly true regarding travel to the Gulf, India, and South-East Asia. “The future looks even worse taking into consideration the more than 200 wide-body aircraft these three airlines have on order for delivery over the next 5 years, fuelling growth at unprecedented and unwarranted levels backed by home-state subsidies” it adds. “Unless action is taken, these aircraft will largely be put into service on routes already served by European carriers, flooding markets & costing European job” it notes.
Massive subsidies distort the market and make it impossible for European companies to compete. Already, the effects of these subsidies are rippling through Europe: money is being lost, routes are being terminated, and jobs are being cut. E4FC gives the example of Bangkok, where between 2004 and 2015, European carriers have decreased their frequency to by eight flights a week, while Gulf carriers have added an additional 66 flights a week between Europe and Bangkok. For every route that a European carrier has to abandon or scrap from service expansion plans, over 600 jobs are lost it claims.
How Europe is reacting
On 7th December 2015, the European Commission (EC) introduced a comprehensive aviation package aimed at, (among other things), providing the EU with the ability to negotiate air transport agreements with third countries, on behalf of its member states. It is made clear in the proposal that such agreements would specifically address the “conditions under which” the airlines owned by the Gulf Coast Cooperation (GCC) countries operate to ensure fairness in competition.
This followed a request by the European Parliament to the European Commission on 11th November 2015, to seek a mandate to begin negotiations with the Gulf Cooperation Countries (GCCs), regarding the subsidisation of their airlines.
Meanwhile, France has joined ranks with Germany to announce a combined European effort to combat the illegal subsidies from the United Arab Emirates and Qatar to their airlines and ensure “fair competition”. They asked their European Union partners and the EU Executive Commission to work together in finding a strategy that will bring about a fair and equitable resolution, to the issue of the Gulf subsidies.
Netherlands has also announced that it will not allow Gulf carriers to launch new flights into Amsterdam’s Schiphol Airport, until the European Union decides on how to address and curtail the subsidisation of Qatar and the United Arab Emirates’ national carriers, Qatar Airways, Etihad Airways, and Emirates.
Wilma Mansveld, former Dutch State Secretary for the Ministry of Infrastructure and the Environment, who supports the initiative, stated “Since the granting of additional traffic rights will be part of such a comprehensive agreement, this means that the Netherlands will not issue any additional traffic rights to carriers from Gulf states, as long as negotiations on this agreement are ongoing.”
So who’s right?
Etihad Airways has developed strong partnership with European Airlines and has equity stakes in Air Serbia (49%), Air Berlin (29.21%), Alitalia (49%) and Darwin Airline (34%). It could be argued without such investment some of these airlines may have gone under. It also holds equity stakes in airlines further afield such as Air Seychelles (40%), Jet Airways (24%) and Virgin Australia (24.2%). Such investment, particularly in the European carriers, has managed to sustain connectivity within Europe and beyond, that otherwise might have been lost.
In a piece posted on 28th September 2015, we detailed a response by Emirates, to claims by the ‘Partnership for Open & Fair Skies’ in the United States, that subsidised Gulf carrier competition is fundamentally distorting the international air transport market. This coalition is composed of American Airlines, Delta Air Lines and United Airlines, along with the Air Line Pilots Association, Int’l, the Allied Pilots Association, the Airline Division of the International Brotherhood of Teamsters, the Association of Flight Attendants-CWA, the Association of Professional Flight Attendants, the Communications Workers of America and the Southwest Airlines Pilots’ Association. These claims are similar to those of E4FC and were well refuted by Emirates, Should Emirates respond to the current claims by E4FC and EurECCA, we will be only too happy to publish it. In the meantime, a balanced approach should be taken to the various claims and counter claims.