Sections

ideals
Business Essentials for Professionals



Markets
16/10/2024

European Airlines Urge Brussels To Address Competitive Imbalance With Chinese Carriers Amid Broader EU-China Trade Tensions




European Airlines Urge Brussels To Address Competitive Imbalance With Chinese Carriers Amid Broader EU-China Trade Tensions
European airlines are calling on the European Union (EU) to take stronger action to ensure a level playing field in the aviation industry, particularly as they face increasing competition from Chinese airlines. The airlines argue that Chinese carriers enjoy significant advantages due to their ability to fly over Russian airspace, while European airlines are barred from doing so, as well as from fewer environmental costs. This issue arises within the context of broader trade tensions between the EU and China, particularly regarding electric vehicles (EVs) and other industries.
 
Unequal Access to Russian Airspace
 
One of the key points of contention is the unequal access to Russian airspace. Since Russia's invasion of Ukraine in 2022, European airlines have been banned from flying over Russia. This has forced them to take longer routes on flights to Asia, increasing fuel costs, flight times, and overall operating expenses. In contrast, Chinese airlines are still permitted to fly over Russian airspace, allowing them to operate shorter, more cost-effective routes to Europe.
 
At an industry meeting in Brussels, Carsten Spohr, the CEO of Lufthansa, raised concerns about this competitive disparity. “We are not allowed to cross Russia but Chinese carriers are,” Spohr said. “If you want a level playing field, we need to ensure any airline landing in Europe avoids Russian airspace. Until that happens, there will be enormous advantages to Chinese carriers.”
 
This airspace issue is emblematic of broader trade disagreements between the EU and China. The European Commission has recently opened an investigation into China’s electric vehicle subsidies, claiming that these subsidies are distorting the market and giving Chinese manufacturers an unfair edge over European counterparts. The EV industry, much like aviation, is becoming a focal point for disputes over trade fairness between the two economic powerhouses.
 
Environmental Costs and the EU’s Emissions Trading System
 
In addition to the airspace issue, European airlines are burdened by the costs associated with the EU’s emissions trading system (ETS), which imposes costs on airlines for their carbon emissions. Chinese airlines, however, are not subject to these same environmental regulations when flying into Europe, giving them a significant financial advantage. According to Spohr, this imbalance creates further competitive disadvantages for European carriers. "Chinese airlines do not have costs related to Europe's emissions trading system," he noted, highlighting the growing frustration within the European airline industry.
 
This echoes a broader pattern seen in the EU-China trade relationship. Europe has been at the forefront of implementing strict environmental regulations, while China has been criticized for not fully adhering to the same standards in international markets. The EV dispute, for instance, is also centered around China’s state support for its manufacturers, which European officials argue leads to market distortion and undercuts European companies that are investing heavily in meeting stringent environmental targets.
 
Delays in Aircraft Deliveries
 
The competitive pressures on European airlines are exacerbated by supply chain challenges affecting the global aviation industry. Both Airbus and Boeing, the world’s two leading aircraft manufacturers, are experiencing significant delays in delivering new planes to airlines due to supply chain disruptions and, in Boeing’s case, industrial action.
 
These delays are compounding the challenges faced by European airlines. Ryanair, for example, has had to revise its passenger traffic forecasts for next year due to expected delays in aircraft deliveries. The airline had initially expected to receive 30 new planes from Boeing, but now anticipates only 10 or 15 will be delivered after March. Ryanair Group CEO Michael O'Leary expressed frustration with the delays, noting that while reduced capacity may be good for ticket prices in the short term, it poses long-term challenges for growth.
 
Air France-KLM has also been affected by delays, particularly with its orders of Airbus A220s, due to engine supply issues from Pratt & Whitney. Lufthansa is similarly struggling with delays in receiving Boeing 777X aircraft, which are now delayed by around five years. These ongoing delivery issues are further complicating the ability of European airlines to compete effectively in an increasingly globalized and competitive market.
 
Broader Trade Implications
 
The challenges faced by European airlines in their competition with Chinese carriers are not happening in isolation. They are part of a wider trade spat between the EU and China, with tensions rising over issues such as market access, environmental standards, and state subsidies. The European Commission’s investigation into China’s EV subsidies is just one example of how these tensions are manifesting in various industries.
 
European airlines are now urging Brussels to take more decisive action to protect their interests, particularly as the aviation sector recovers from the effects of the COVID-19 pandemic. The disparity in access to Russian airspace and the unequal application of environmental regulations are seen as critical issues that need to be addressed to ensure fair competition in the global aviation market.
 
As the EU continues to push for stricter environmental standards and fairer trade practices, the aviation industry’s demands for a level playing field echo similar concerns being raised in other sectors, such as automotive and technology. The resolution of these issues will likely be a key factor in shaping the future of EU-China trade relations, with broader implications for global competition and market fairness.
 
(Source:www.streetinsider.com) 

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc