EU airlines face further problems, March 2003

EU Transport Ministers are under pressure to provide financial support to the air transport sector, following the outbreak of war in Iraq.

The Financial Times reported that the Greek Presidency of the Council of the European Union wants to see 'substantial aid', because the war 'is expected to have a far greater effect on European air transport than on the air transport sector of other regions.'

According to the BBC, the war has already 'led to a slowdown in global travel, forcing airlines to take emergency measures such as drastic cuts in flight schedules and jobs.' The BBC has identified a number of European airlines which have made - or will shortly make - cuts to flights and/or jobs: Air France, British Airways, Finnair, Iberia, KLM, Malev (Hungary), Swiss International Air Lines, Tarom (Romania).

Speaking in a worldwide context, a spokesman for the International Air Transport Association, IATA, said: 'With military operations underway in Iraq, the airlines need to work quickly and closely with governments, regulatory bodies and industry service providers to ensure that civil aviation will not be crippled by this conflict'.

Airlines have struggled with mounting losses since the terrorist attacks of 11 September 2001. IATA estimates that the industry has lost some $30 billion, and that the war in Iraq 'could easily add $10 billion dollars of losses on international traffic by extending the current traffic slump well into the summer season.' IATA want to see the industry change, and has identified three obstacles or 'pillars of stagnation': the bilateral system, national ownership rules and the attitude of competition authorities.

In response to concerns over the conflict, the European Commission issued, on 26 March 2003, a Communication on the consequences of the war in Iraq for energy and transport. 'The war in Iraq will have major repercussions', it states, 'and not all the implications can be measured at this stage.'

With respect to air transport, the Communication identifies three possible ways in which the war might impact civil aviation in Europe:

• closure of airspace in the region of the conflict, with consequent rerouting of traffic, essentially through Russia
• congestion of Europe's airspace, due to additional military air traffic
• reduced demand

The Communication confirms that the Commission is examining measures to support the civil air transport sector, although it 'cannot accept measures which would have the effect of creating distortions between States and companies, or accept that the present situation might serve as a pretext to delay necessary restructuring.'

The Communication also reminds those concerned that measures were taken to help the industry in the wake of the 1991 Gulf War and the 2001 terrorist attacks in the United States. They included a relaxation of some types of State aid and of competition rules, and greater flexibility concerning the allocation of airport slots.

It now foresees a similar series of measures being introduced to tackle the latest crisis. There is particular concern over the question of direct financial support for airlines. The Commission is largely resisting such assistance, but the Greek Presidency is pushing for it and it seems likely that the United States will give its airlines more aid. Decisions were expected to be taken by EU Transport Ministers at their meeting on 27-28 March (the airline issue was due to be discussed on the 28th).

Links:

European Commission:
	Communication - on the consequences of the war in Iraq for energy and transport (COM (2003) 164)
European Sources Online: Financial Times:
	26.03.03:	Greece calls for Brussels war aid to airlines
BBC News Online:
	27.03.03:	EU weighs airline aid
	27.03.03:	War forces airline cutbacks
IATA:
	Homepage
	27.03.03:	Airports and Air Traffic Control Must Reduce Costs
	22.03.03:	Airline Crisis Worsens - Liberalization Needed
	19.03.03:	Air Transport Well Prepared for Looming Conflict
European Sources Online: In Focus
	Air transport: European Commission seeks to develop international air transport policy, March 2003
	Europe's airlines in crisis, October 2001

Eric Davies
Researcher
Compiled: Friday, 28 March 2003

Transport Ministers are under pressure to provide financial support to the European air transport sector, following the outbreak of war in Iraq which threatens to plunge the industry even further into crisis.