EU to investigate alleged unfair US ticket pricing

Date: 14/03/02

By Laurence Frost

THE European Commission is to investigate complaints that US airlines have used state subsidies to undercut EU carriers unfairly since 11 September.

Loyola de Palacio, the transport commissioner, made the disclosure as she unveiled plans that could eventually allow punitive duties against US airlines if the claims are substantiated.

'There have been complaints from EU airlines to say that US airlines have been using their subsidies to provide unfair competition,' de Palacio said.

'We have to carry out an investigation to find out whether they really are using state aids to artificially reduce prices.'

The Spanish commissioner has previously voiced concern over the level and use of government support given to American carriers since the Twin Towers attacks; these total around 5.5 billion in direct grants and a further 16.5 billion in loan guarantees.

But her comments this week were the first acknowledgement that the Commission is acting on formal complaints from more than one airline, and is likely to further antagonise deteriorating EU-US trade relations.

Under the proposal, the Union could impose increases in airport tax on offending airlines - a move that will also prove controversial among member states, which currently control their own tax levels.

Trade Commissioner Pascal Lamy, co-presenting the plan with de Palacio, acknowledged the measures had been inspired by the aid granted to US airlines.

But he insisted their timing was not a tit-for-tat response to last week's imposition of steel tariffs by the US. 'There is no link between this and what happened to steel last week,' he said. 'This is no more than coincidence.'

The steel tariffs are a new headache for EU-US trade negotiators already struggling with a backlog of disputes. In the largest, on US foreign sales corporations, the World Trade Organisation (WTO) has already backed the EU and is expected to authorise punitive sanctions next month.

But Lamy rejected the idea of a special EU-US summit to clear the pile-up of damaging rows, saying such a move would 'short-circuit' the WTO's dispute settlement process.

The European Commission is to investigate complaints that US airlines have used state subsidies to undercut EU carriers unfairly since 11 September 2001.