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Competition Policy

Air Transport


Air transport is of vital importance for consumers, other sectors, and the economy as a whole. The air transport market within the EU has expanded over the past three decades and particularly since liberalization, in terms of size, scope, demand and connectivity. Capacity, measured in terms of scheduled seats available per week, increased by 152% in the period 1992-2015. In the period between 2007 and 2015 low cost flights increased by some 60%.  Currently, the five largest European airline groups Ryanair, easyJet, Lufthansa Group, Air France-KLM and IAG control some 45% of the European market. This compares with a relatively higher degree of concentration in the US where some 80% of the total market is controlled by four airlines: Southwest, Delta, United and American Airlines.



Liberalization and the application of the competition rules

The liberalization of the EU airline market is generally regarded as one of the outstanding achievements of the EU internal market introducing market dynamics, improving efficiency, and generally bringing about increased choice and lower fares. Following a series of legislative packages adopted some three decades ago, air transport services within the EU are now fully liberalized and open to competition. Today, any airline can operate any route within the EU, provided it meets the current safety and security EU standards and ownership and control requirements contained in Regulation 1008/2008 and has a valid operating license.

In keeping with the Commission’s general policy of moving away from sector-specific rules, all sector-specific exemptions for airlines in relation to certain types of agreements have been repealed. Today the Commission has the same investigative and regulatory powers in relation to this sector as in any other sector and Council Regulation 1/2003, which defines the extent of the Commission’s investigative and regulatory powers, is fully applicable to this sector.

International Context – Air Service Agreements and Agreements between Airlines

At the international level, cross - border traffic rights – rights to take-off and land at a given airport - are negotiated through bilateral air service agreements (ASAs). These generally include a nationality condition. This results from the Chicago Convention, which established the principle that every state has exclusive sovereignty over the airspace above its territory. Air transport services between signatories of this Convention are thus regulated by ASAs. These usually require that in order to benefit from cross-border traffic rights the airlines should be owned or controlled by one of the contracting states.



The previous decade has seen further consolidation through either the exit or the takeover of airlines, including those in financial difficulties (e.g. Alitalia, Condor) or having gone bankrupt (e.g. Malev, Cyprus Airways, Lithuanian Airlines, Estonian Air, Monarch, Air Berlin, WOW Air, Germania, Thomas Cook UK, Adria Airways, Aigle Azur and XL Airways). Furthermore, with regard to the extra-EU markets, more than 80% of the passengers between Europe and the USA are carried by the three major international alliances in “metal-neutral” JVs.

In recent years, this trend has continued. For examples - see Key Cases and Judgements.


State Aid

The application of State aid rules to the airport and air transport sectors constitutes part of the Commission's efforts aimed at improving the competitiveness and growth potential of the EU airport and airline industries. A level playing field among EU airlines and airports is of paramount importance in order to attain these objectives, as well as for the entire internal market, given the highly competitive and pan-European nature of the air transport market for intra EU routes. A level playing field among airports is also very important, given that airports compete at EU level to attract airlines and passengers. At the same time, regional airports can prove important both for local development and for the accessibility of certain regions, in particular against the backdrop of positive traffic forecasts for EU air transport.

Therefore, the right balance has to be struck between the need to allow certain types of State aid to airports and the need to minimise competition distortions caused by aid in the transport sector.

Certain measures in favour of airport or airlines do not constitute State aid. For example, at an airport, activities such as air traffic control, police, customs, fire-fighting, activities necessary to safeguard civil aviation against acts of unlawful interference and the investments relating to the infrastructure and equipment necessary to perform those activities are considered in general to be of a non-economic nature. Funding them does not constitute State aid if it is strictly limited to compensating the costs to which the above activities gave rise and if the funding is not be used to finance other activities.

Public authorities can also invest in airports under terms acceptable by market operators.

Another example consists in arrangements between public airports and airlines when the revenue generated by these airlines for the airport covers the costs of the arrangement. In such cases, no aid is involved.

Finally, when measures to air transport constitute aid, such aid may be allowed if it fulfils the conditions laid down in the State aid guidelines on airports and airlines (“Aviation Guidelines”). The Aviation guidelines authorizes for example investment and operating aid to airports as well as start-up aid to airlines to start new routes under very specific conditions.