The European Commission (EC) has put forward proposals that would allow it to curb the abuse of state subsidies by carriers outside the European Union (EU). It is asking for the power to impose fines where carriers from third countries are found to be guilty of predatory pricing. The proposal comes in the wake of subsidies given to US and other non-EU carriers after 11 September.

The EC's plans have been seen in some quarters as retaliation for Washington's decision to increase import duties on steel, but Brussels is adamant that this is not the case. Gilles Gantelet, spokesman for EC transport commissioner Loyola de Palacio, says the aid given to Swissair and its successor, Swiss, was also of concern. Switzerland is in the process of joining the European single aviation area, which would mean Swiss carriers would become subject to EC competition rules. However, this move is still being ratified by member states, so the rules do not currently apply.

Gantelet says that in both the Swiss and US cases there was less predatory pricing than initially feared. This point is echoed by Rene Fennes, general manager public policy at the Association of European airlines (AEA), who says that "things have calmed down" since the immediate aftermath of 11 September. However, Brussels is keen to ensure, that next time round, it has more clout. It points to the legal powers given by the transport secretary in Washington to penalise carriers guilty of anti competitive behaviour.

Brussels insiders believe the message from the EC is for internal, as much as external consumption, directed at the Council of Transport Ministers. "The clear message to the Council is the need for a common approach," says one insider, adding that this forms part of the EC's push to be given a mandate to negotiate a transatlantic common aviation area or something similar with the USA. Not all member states are keen to see these powers go to Brussels.

The AEA, meanwhile, is taking a neutral stance. Fennes says that while the EC's plan "is not a bad idea", there are question marks about its implementation. For example, He says that it is unclear what the response would be if the USA retaliated. "It is useful only in the context of a common aviation policy," he says.

Source: Airline Business