Lufthansa, Air France-KLM ask EU to develop strong law against Gulf carriers

By Julia Fioretti

BRUSSELS (Reuters) - The French and German flag carriers have urged the European Commission to counter what they say are unfair practices by Gulf airlines, seeking to influence the drafting of a new EU law.

The CEOs of Lufthansa and Air France-KLM wrote to EU Transport Commissioner Violeta Bulc this week asking the Commission to define what practices amount to anti-competitive behaviour and providing for the limitation of traffic rights as a sanction.

"The incredibly fast parallel expansion of the Gulf carriers in Europe for more than ten years has severely damaged European network carriers," the CEOs wrote in the letter.

"Not acting would be short-sighted: short-term advantages for European consumers in the form of lower fares would only last until such time as European network airlines have been largely driven out of the market."

European legacy carriers have been hit by the rapid growth of the main Gulf carriers - Emirates, Qatar Airways and Etihad - and shifting traffic flows to Asia.

They have repeatedly accused the Gulf airlines of receiving illegal state subsidies - which the companies deny - and have asked the EU to do more to tackle the challenge.

Lufthansa has started cooperating with Abu Dhabi-based Etihad. But the charge of unfair competition has not gone away, with Lufthansa CEO Carsten Spohr repeating earlier this month that he rejected subsidies as he signed a catering deal and maintenance project with Etihad.

The letter said Lufthansa, Air France, KLM, Brussels Airlines, Swiss and Austrian Airlines have together had to terminate services to over 30 destinations in the Middle East, Asia and India in recent years.

The Commission is working on a law enabling it to impose duties on non-EU airlines or suspend their flying rights if it finds they have harmed European airlines through unfair subsidies or discriminatory practices, a draft seen by Reuters showed.

Lufthansa and Air France-KLM also asked the Commission to ensure that a reduction in state subsidies and increased financial transparency be the outcome of talks with Qatar on an air services agreement.

"As the European Commission is offering a new EU-wide air services agreement to the State of Qatar, it needs to be with the explicit understanding that unfair competitive practices and subsidies need to be scaled down," the executives wrote.

The Commission was given a mandate by member states to negotiate air services agreements with Qatar and the United Arab Emirates last year. So far, discussions have only started with Qatar.

Such agreements set out where and how often foreign airlines can fly into the EU.

(Reporting by Julia Fioretti Editing by Ruth Pitchford)