Mobility and Transport

Air

External Aviation Policy – Fair Competition

External Aviation Policy – Fair Competition

When the European Commission negotiates international air transport agreements with third countries, it strives for EU airlines and those based in third countries to compete on fair grounds. Market opening goes hand in hand with fair competition.

Fair competition provisions

EU airlines are subject to comprehensive provisions regarding competition law and State aid to ensure that they all compete on fair grounds within the EU single aviation market. Competition must be based on commercial market principles and merits, rather than on privileged treatment from national governments or anti-competitive practices.

One of the key objectives of EU external aviation policy is to provide new opportunities for EU airlines in third countries (new connections). This is done on the basis of reciprocity, meaning that third-country airlines also obtain the same opportunities in the EU market. It is therefore key to ensure a level playing field between EU and third-country airlines operating between the EU and the third countries in question.    

This is why, over time, comprehensive air transport agreements negotiated by the Commission have included a more developed set of “fair competition” provisions. These are essentially a common understanding between the parties to the agreement (EU and third country) that it is their joint objective to have a fair and competitive environment in which the air carriers of the parties enjoy fair and equal opportunities to compete in the provision of air transport services.

In order to achieve this objective, the EU and the third country in principle agree to:

  • Adopt competition law rules in their national legal order;
  • Establish an operationally independent competition authority equipped with all necessary powers and resources to enforce those rules;
  • Eliminate all forms of discrimination or unfair practices that would adversely affect the fair and equal opportunity of the air carriers of the other party to compete;
  • Not to grant subsidies to any air carriers if these subsidies would adversely affect the fair and equal opportunity of the air carriers of the other party to compete. Nevertheless, state support is expressly allowed under certain conditions. This is the case of support to insolvent or ailing air carriers, subsidies to make good the damage caused by natural disasters or exceptional occurrences or subsidies to remedy a serious disturbance in the economy of one of the parties;
  • To be transparent about the financial accounts of the airlines and to exchange information, whenever needed, for example by ensuring that accounts are published or available upon request or by providing details on the financial relations between the airlines and the national governments.

The comprehensive air transport agreements include dispute settlement procedures, which can be activated whenever the parties struggle to find an agreement regarding fair competition conditions.

Besides negotiating the inclusion of fair competition provisions in the comprehensive air transport agreements with third countries, the Commission also strongly encourages EU Member States to incorporate similar fair competition provisions in their bilateral agreements with third countries.

Regulation (EU) 2019/712 on safeguarding competition in air transport

In addition to the fair competition provisions in the comprehensive air transport agreements, the EU has at its disposal another instrument to ensure fair competitive conditions between EU-based airlines and airlines based in third countries.

In May 2019, the European Parliament and the Council adopted Regulation (EU) 2019/712 on safeguarding competition in air transport.

Regulation (EU) 2019/712 opens the possibility for the Commission to conduct investigations into practices distorting competition between Union air carriers and third-country air carriers and causing, or threatening to cause, injury to Union air carriers.

The Commission will carry out an investigation, based on a complaint submitted by a Member State, one or more Union air carriers or an association of Union air carriers or on its own initiative, if there is prima facie evidence of:

  1. a practice distorting competition, adopted by a third country or a third-country entity;
  2. causing injury or threat of injury to one or more Union air carriers; and
  3. a causal link between the alleged practice and the alleged injury or threat of injury.

Such an investigation will involve all interested parties, such as airlines, relevant sectoral associations and public authorities from the Member States and third countries. It may also involve inspections in the third country where the alleged anti-competitive practice occurs.    

When alleging an unfair competition practice by a third country or third-country entity, the complainant must corroborate this allegation with factual, verifiable and thorough evidence, quantifying the injury or threat of injury to Union carriers and proving that the distortive practice is at the origin of this injury or threat of injury.         

If, at the end of the procedure, there is confirmation through solid and documented evidence of such an anti-competitive practice, the Commission may impose redressive measures on the third-country air carriers benefiting from the practice, in the form of financial duties or any operational measures of equivalent value.

Such redressive measures should be proportionate and cannot exceed what is necessary to offset the injury or threat of injury to the Union air carriers concerned. Additionally, they will only be imposed if the Commission concludes, on the basis of an economic analysis, that they will not be against the Union interest.

The redressive measures will remain in force only as long as, and to the extent that, it is necessary in view of the persistence of the practice distorting competition and the ensuing injury. They may be reviewed where the circumstances underpinning them change.

There is a high degree of complementarity between the fair competition clauses in the international agreements and Regulation (EU) 2019/712. Whenever the EU has concluded a comprehensive agreement with a third country containing appropriate fair competition provisions, it will, as a matter of priority, use the dispute settlement procedures of that agreement to seek to solve any conflict regarding competition issues.

Member States have a duty to cooperate loyally with the Commission in relation to cases conducted under Regulation (EU) 2019/712. For example, Member States may have an issue with potentially anti-competitive practices favouring a third-country airline and may try to solve the issue under the dispute settlement procedures of their bilateral air transport agreement with that third country. In such case, Member States have a duty to inform the Commission of any actions taken by them, invite the Commission to attend any relevant meetings and provide it with any relevant information that may have a bearing on cases falling within the scope of Regulation (EU) 2019/712.    

Links

Regulation (EU) 2019/712 of the European Parliament and of the Council of 17 April 2019 on safeguarding competition in air transport, and repealing Regulation (EC) No 868/2004

How to file a complaint under Regulation (EU) 2019/712 of the European Parliament and of the Council of 17 April 2019 on safeguarding competition in air transport, and repealing Regulation (EC) No 868/2004