Dr Sant intervention:

EU rules on State Aid in the aviation sector are intended to prevent government support from distorting competition and effecting trade between Member States. However, at a global level, we note unequal competitive conditions in the aviation market – this includes state subsidies as well as regulatory issues such as labour conditions and environmental issues. The impact of such discrepancies is most evident in the EU – Middle Eastern airlines’ scenario. Here EU airlines are being progressively ousted from the market. For example, Lufthansa claims that its Frankfurt hub has lost a third of its market share on routes between Europe and Asia since 2005.
– What are the most pertinent issues in this area and what are the plans for a way forward in this regard?
– Is there a solution in sight? What kind of profile might it take?
Also on aviation, last month we received the news that Lufthansa will purchase more than half of Air Berlin after the latter filed for insolvency last August. In the meanwhile, low-cost airline Ryanair is calling the merger a “conspiracy” between Lufthansa and the German government to create a national carrier. Others are complaining that this merger would seriously strengthen the market position of Lufthansa and Star Alliance.
Is the Commissioner in the position to give further details on the process used to examine this particular merger?

Ms. Vestager:

This is a very important market for both the airline industry and for citizens, as seen by how the revolution of travel by airplane over the last twenty years has changed many people’s’ lives. Prices coming down have enabled many people to travel farther and faster than was ever possible. When I was a child we would go by car to Hudson, but nowadays my children would not find that very exciting. Obviously, the airline industry plays an important role in our work. My colleague Violeta Bulc is very, very active on the issue with gulf carriers and the involved European actors in order to enable European competition….because you are precisely right; we have this worry about subsidies in carriers outside of Europe and she is very much on that. The council has given a mandate for the United Emirates and Qatar, the home of major airlines, to negotiate agreements in order to have much more transparency and I think this is important. We also keep a keen eye on bilateral air service agreements, if they are sufficiently open for competition and in the merger field of course airlines as well.
Now on the merger of Lufthansa and Air Berlin, we are investigating these markets very thoroughly because we see very serious overlaps. If you look at Germany, inside of Germany, there is a risk of a very strong limitation of competition on quite a number of routes and that of course leads to the risk of poorer service and higher prices. And we already see now that just the fact that air berlin in not in the market, that their planes are grounded, that changes the way the pricing mechanisms are working. Of course, as the commission, we have nothing to do with prices it is for the company to set prices but we can see immediately that there is a reaction in the markets when some routes are not served and some planes are grounded. In order to make sure that as many as possible flights can continue we made a very early derogation from our procedures to avoid the risk of gun dumping because some Air Berlin planes were already flying Lufthansa routes and to enable that to continue we made this derogation so of course our obligation is to make sure we are not hindering things to work in a proper way but also looking into the future to see what would happen if a merger went on. In some groups, we see no competition anymore and this is what we are doing right now. We are on a very strict deadline to do that and I think that serves the airline passenger market well. I think we are looking at early December as a deadline.

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