Tuesday, April 20, 2010

State Aid for EU Airlines?

In response to the volcanic ash which shut down the European Union's air transport sector last week, the European Commission has convened a special working group to discuss the possibility of relaxing EU State aid rules to allow Member States to provide financial assistance to airlines impacted by the disruption.  See Peppi Kiviniemi, EU Group to Mull Updating State Aid Rules for Airlines, Dow Jones Newswires, Apr. 19, 2010 (available here).  Not everyone is pleased with this possibility.  Peter Ramsauer, German's Transport Minister, said on Monday that he would "resist any [aid] appeal to the State.  Ramsauer noted that while some industrial sectors had been harmed by the ash crisis, others had profited from it.  See Tony Barber, German Minister Opposes Airline State Aid, Fin. Times, Apr. 19, 2010 (available here). 

While EU carriers are drawing comparisons between the economic impact of European airspace closure and the hardships air carriers on both sides of the Atlantic felt after the 9/11 terrorist attacks to bolster their aid request, analysts have been quick to point out that this most recent disruption is unlikely to result in the same longterm drop in demand for air services that the terrorist attacks engendered.  The cross-sectoral impact of the crisis also lessens the airlines' pleas for a special exception to EU State aid rules.  However, some EU airlines have countered by flatly declaring that they face bankruptcy unless aid is given.  See Steve McGrant & David Pearson, European Airlines Seek Help With Cost of Ash Crisis, Dow Jones Newswires, Apr. 20, 2010 (available here). 

The European Commission has not been shy about acting on behalf of its airline industry as of late.  Last year, in the midst of falling demand for air services, the Commission opted to suspend its "use-or-lose" rule for airport takeoff and landing slots so that airlines could cut flights without the risk of forfeiting their rights to scarce capacity at EU airports.  And while it's difficult to tell how credible the threat of airline bankruptcy is following the flight disruption, the Commission is unlikely to wait around for carriers to start failing before it intervenes.  The political costs of inaction would be too high.

http://lawprofessors.typepad.com/aviation/2010/04/state-aid-for-eu-airlines.html

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