WRITTEN QUESTION P-2837/01 by Bart Staes (Verts/ALE) to the Commission. Distortions of competition and state aid to ailing airline companies.
Date: 2001-10-05
Institutions: European Parliament, Provisional data
Subjects: State aid, United States, World Trade Organisation, air transport, bilateral relations, environmental impact, restriction on competition

4.7.2002

EN

Official Journal of the European Communities

C 160 E/43

(2002/C 160 E/048)

WRITTEN QUESTION P-2837/01

by Bart Staes (Verts/ALE) to the Commission

(5 October 2001)

Subject: Distortions of competition and state aid to ailing airline companies

The fifteen EU Finance Ministers decided on Saturday 22 September 2001, to stop authorising direct state
aid to European airline companies. The Ministers’ statement also stipulated explicitly that general
government aid to unprofitable companies was out of the question, and that any proposed measures
would have to be notified to the European Commission, specifying the amounts involved. In compensation
for the economic impact of the horrific events in New York and Washington, EU Member States could
however help their national carriers financially with meeting the rising cost of insurance premiums.
Article 87 of the EU Treaty explicitly authorises support measures in the event of ‘natural disasters or
exceptional occurrences’. In the short term and for up to one month, EU governments can directly cover
third-party damages resulting from war or terrorism. The United States are providing state support of 15
billion US dollars, 5 billion of it in direct support, to the ailing airline industry. That direct support, at the
very least, conflicts with World Trade Organisation (WTO) rules. An these extensive support operations are
moreover strengthening the competitive position of the airline industry at the expense of other, other
more environmentally friendly, means of transport. In civil aviation hardly any external costs are passed
on: excise duty is not paid on aviation spirit, and air tickets are not subject to VAT.

Does the Commission consider American state aid of 15 billion US dollars, 5 billion of it in direct support,
for the ailing airline industry, as compatible with WTO rules? If so, what arguments does it advance in its
favour? If not, will the Commission bring proceedings before the WTO in response to the violation of its
free-market rules? What action will the Commission take in order to establish relations of fair competition
between different modes of transport in response to the further strengthening of the airline industry’s
competitive position by the above support measures and the adverse impact on people and the
environment?

Answer given by Mr Lamy on behalf of the Commission

(12 November 2001)

Maintaing a level playing field amongst airlines on both sides of the Atlantic is an important issue which
the Commission takes very seriously.

WTO rules, however, do not contain a general prohibition of subsidies. Furthermore,
the General
Agreement on Trade in Services (GATS) does not yet provide for any specific disciplines with respect to
subsidies, even though negotiations in this area are already part of the ‘built-in agenda’ and could be re-
enforced in a New Round. More importantly, most air transport activities are currently carved out from
the GATS by the Annex on Air Transport Services and therefore not covered by the obligations in this
Agreement. In the absence of applicable WTO rules to the aid package provided by the US authorities, the
issue of WTO compatibility does not arise.

Therefore, any possible trade distortions caused by direct support to airline companies in the United States
must be addressed in the context of the conventional EC-US bilateral framework. Unfortunately, in this
area, Member States have so far preferred to handle relations with the US on a purely bilateral basis
without reference to their EU partners or the EU legal framework = a situation the Commission is
currently challenging in the European Court of Justice. The Commission believes the current situation
makes an EU-level policy for external relations in the air transport field even more important. The
Commission will therefore continue to press for an EU-US negotiating mandate for air transport and, as a
first step, propose to the United States a code of conduct to avoid distortion of competition resulting from

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Official Journal of the European Communities

EN

4.7.2002

payment of state aid. In the absence of such an agreement and pending the negotiating mandate, it is up to
the Member States to proceed with a minimum of Community co-ordination in the framework of the
bilateral agreements.

In respect of the environmental impact, in the short term the attacks of 11 September have compounded
the already burgeoning problems of over-capacity in the industry. Measures to correct this have resulted in
the removal of substantial portions of many fleets and the acceleration of retirement programmes for
older, less efficient equipment. As a result, the short term environmental impact of both emissions and
noise from aviation has actually been reduced. It is likely to be some time before traffic returns to its pre-
it is likely to be with somewhat less
11 September level, with or without state aid, and as it does,
environmentally damaging fleets.

For the longer term, and further to the results of the recent 33rd Assembly of the International Civil
Aviation Organisation, the Commission is working on proposals for a framework setting the conditions
under which States could introduce operating restrictions at their airports with a view to tackling the noise
issue. The Community is also considering how emissions related levies might be introduced to meet the
objective of internalising the external costs of aviation. A Commission study is scheduled for completion
later in the year.

It is of course important that there be fair competition in all respects and that aviation be treated no more,
nor less, favourably than other modes. To this effect, the Commission is keen to ensure that assistance
given to the airlines both in the EU and elsewhere addresses only the damages incurred as a direct result of
the attacks.

(2002/C 160 E/049)

WRITTEN QUESTION P-2839/01

by Gary Titley (PSE) to the Commission

(5 October 2001)

Subject: Czech banking laws

In its report of July 2001, the European Parliament alerted the Commission to competition problems in
the Czech Republic’s banking sector. The recent implementation by the Czech authorities of an unlimited
guarantee granted to the CSOB bank, in the context of its take-over last year of IPB, is evidence that such
problems are ongoing.

We understand that the Commission is examining that specific case and the wider issue of competition
and state aid in the financial services sector of the Czech Republic and other accession countries. While
accepting that the Europe Agreement does not provide for satisfactory remedies in specific cases, the
Commission nevertheless has a powerful political tool available to it, in the shape of the Enlargement
report it is drafting on each of the candidate countries. Reference to existing problems in these reports,
backed up by case-specific examples, would send a strong signal to the authorities in the candidate
countries that they must address these issues more satisfactorily.

Since I raised this issue with the Commission in the Foreign Affairs Committee of June 2001, I have been
informed that the Czech authorities have taken no discernible steps to resolve the situation. Even more
worryingly, there are strong indications that the competition authorities in the Czech Republic are not
dealing with the case in an independent manner and that proceedings by them to evaluate the state aid in
this case are simply being ignored.

The value of the Enlargement reports is that, as well as accurately reporting and analysing the convergence
of accession countries towards the acquis, they provide an assessment of the readiness of accession
countries to conform with the principles and philosophy of the EU. Could the Commission indicate
whether it intends to use the opportunity presented by the publication of the reports to send a powerful
message to the Czech Republic that it must address this issue promptly?