Two big issues dominate Kinnock's early agenda - dealings with the US and state aid for airlines. A plethora of other points, from slot allocation to codesharing, remains to be dealt with but may have to take a back seat while the major questions are resolved.
The deepening resolve of six EU member states to join the Netherlands in signing open skies agreements with the US has left the Commission in a fix. The six, with Belgium in the lead, are determined to sign bilaterals which will allow their flag carriers to implement codesharing deals with US carriers, just like the one between KLM and Northwest. But the Commission feels these arrangements will affect the internal market, so it claims it should at least have a role to play in the talks. The member states refuse to grant the Commission a negotiating mandate, since most of them think (quite rightly) they can get a better deal on their own.
This is a clear case of putting country before community. The Commission is right to say that open skies deals with the US may affect the running of the internal market for aviation. Codesharing deals with US carriers will change traffic flows within Europe; the successful arrangement between KLM and Northwest is already proving that. And the US market is so important that successful penetration of it may make the difference between success and failure for a European carrier.
Another issue is competition policy. If the Commission is given competence in external relations, it will also gain the right to deal with anti-trust issues affecting routes between the EU and third countries. This would mean that the Commission could fine carriers for any restrictive or anti-competitive actions, from predatory practices to pooling agreements.
Anti-competitive actions on non-EU routes may affect the internal market by allowing carriers to use the resulting profits to cross-subsidise money-losing intra-EU routes. Effective alliance activity requires anti-trust immunity from the US; the Commission says it should also have a right of veto. But time is not on the Commission's side. By the time it gets a negotiating mandate, key deals may have been agreed and the blueprint for the future set in place.
The Commission is at loggerheads with some member states over the second major issue - state aid. Many member states are still smarting after the last round of approvals for Air France, TAP Air Portugal and Olympic Airways, and many in the Commission privately agree with them. It has even been suggested that Commission objectives would be well served if it were to lose the legal challenge which has been launched against its approval of the Air France recapitalisation.
Even before this issue is decided, Kinnock now has to evaluate a further round of state handouts, starting with Iberia's request for a second capital injection of $1 billion. The first step - throwing out Iberia's claim that this is not really state aid - was easy. But the next - deciding whether to allow it or not - will be much more difficult.
Within the Commission, there is significant opposition to granting the Iberia request, on the grounds that it is a second recapitalisation. However, Iberia claims extenuating circumstances, including external economic developments beyond its control. And a refusal for Iberia could be challenged on the grounds of unfairness, given the size of the aid packages awarded to Air France among others.
The Commission is again hampered by the lack of a clear mandate. EU member states are divided on the issue - those whose airlines have benefited from state aid favour it, while those which believe in leaving the markets to themselves do not. And the Treaty of Rome does not allow the Commission to take a view on whether governments should own an enterprise, and prevents it from making state aid approval on a 'last time ever' basis.
Both the external relations and state aid issues are integral to the success of the internal market for aviation. The Commission needs to push harder for the right to adopt appropriate policies in these areas. If EU member states really believe in the internal market they have created, they must give the Commission the mandates it requires to ensure the market works effectively. Otherwise, the third package is not worth the paper it's written on.
Both the external relations and state aid issues are integral to the success of the internal market for aviation. The Commission needs to push harder for the right to adopt appropriate policies in these areas. If EU member states really believe in the internal market they have created, they must give the Commission the mandates it requires to ensure the market works effectively. Otherwise, the third package is not worth the paper it's written on.
Source: Airline Business
