Applicants hestitate over aviation offer

Date: 08/10/1998

By Chris Johnstone

SOME central and eastern European governments seem to be having second thoughts about accepting an EU offer of fast-track entry into a vast liberalised aviation market.

The countries concerned are expected to give a formal response to the idea by the end of the year.

But there are already signs that some are finding it difficult to decide whether to take a rapid plunge into an enlarged aviation market, which could stretch from the Atlantic to the Black Sea, or opt for a more gradual exposure to competition.

European Commission proposals envisage countries applying for Union membership, including Cyprus, joining the EU's current 15 members, Norway and Switzerland in a European Aviation Area.

Under the Commission's plan, airlines from countries which opt for fast-track membership of the area, and are accepted, could be competing on the same terms as Europe's biggest airlines such as Lufthansa and British Airways within around two years, much sooner than if they wait for completion of the overall negotiations on EU membership. But some of the applicant countries have already indicated that they have doubts about the wisdom of accepting the Union's invitation to swift competition and would prefer a longer transition period.

“Slovenia, the Czech Republic and Estonia were all keen at first, but now have some reservations,” said a diplomatic source.

Many airlines in the region are still struggling to make profits and pay for the expensive transformation of their fleets from Soviet to western aircraft. Poland has already taken a cautious line, with national airline LOT reportedly seeking a five-year breathing space before Warsaw opens up its market to competition and abandons existing heavy regulatory controls on aircraft and capacity operating in and out of the country.

High repayment costs for its modernised fleet of aircraft are one of the reasons for this caution. “LOT has one of the most modern fleets in the world. Unfortunately, that has come at a cost and there is insufficient capital around at the moment to develop the business,” said a Polish diplomat. “We will probably ask for a transition period.”

Latvia, on the other hand, is believed to be keen on joining the new aviation area as soon as possible.

Western airlines are generally in favour of the Commission's market opening proposal, although some raised early worries that east European airlines, with their cheaper crew and costs, might undercut fares.