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Tougher EU airport slot rules trigger Asia retaliation threat, risk industry trade war By Reuters

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© Reuters. FILE PHOTO – A view from the empty Changi Airport departures hall in Singapore, Singapore 18 January 2021. REUTERS/Edgar Su/File Photo

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By Jamie Freed

(Reuters) – Regulators in Asian hubs like Singapore and Hong Kong have threatened to retaliate against European Union plans to force airlines to start using take-off and landing slots frozen during the coronavirus pandemic, a move that could oblige Europe’s carriers to fly empty seats for thousands of miles at a loss.

European carrier flights to Asia are likely to be subject to similar terms from authorities in charge of slots at Asian airports.

Industry leaders believe that there was a rare moment of unity when the carriers had to be rescued or kept afloat during the pandemic. However, the disagreement has brought out fundamental differences in a fractured sector, as the world embarks on a multi-speed recovery.

Is this a trade war?” “Certainly, the germ of one,” stated Peter Harbison (chair emeritus) of Sydney’s CAPA Centre for Aviation consulting.

It will only get worse as more airlines fall and the international market remains closed or uncertain.

Tensions have risen since July’s announcement by the EU that airlines would be forced to use half their rights or face losing them to other competitors. The EU partially restored competition rules which were abandoned by airlines as they struggled to stay alive during the pandemic.

However, the EU decision shows that Europe is experiencing a rapid recovery of its short-haul markets. Asian carriers protested they would be unfairly punished because it will take them longer to rebuild their long-haul networks.

European airlines will be required to fly at least half the time by Asian regulators, according to industry sources. This could lead, say industry sources, into political battles about the future of vital transport links for international trade.

‘RECIPROCITY’

Singapore, one of several Asian jurisdictions to line up previously unreported ‘reciprocity’ rules, has included the provisions to ensure fair treatment, said Daniel Ng, director air transport at Civil Aviation Authority of Singapore.

Long quarantines are still the rule in Asia. In July 2019, airlines used just 14% their international capacity, which is well below the 46% in Europe and 48% of North America.

Cathay Pacific, last month, warned that Hong Kong’s slow recovery would result in it losing precious overseas airport slots. This could also harm the city’s status as a hub.

According to Reuters statements, Taiwan’s China Airlines as well Korean Air Lines raised concerns over the EU rules. Singapore Airlines (OTC;) refused to comment.

Lufthansa, the EU airline with the largest number of flights to Asia, stated that the EU’s strict rules can ultimately damage the environment and airlines. If they have to fly empty planes in order to maintain their slots, this could be detrimental to the global climate. KLM and Air France both stated that they did not base their flight decisions on available slots.

‘SHOCK PHASE’ OVER

The EU broke with a global industry recommendation and tightened rules for the winter schedule season, which runs from October to March, after heavy lobbying by low-cost carriers like Ryanair, with big short-haul networks, and European airports, many of which are privatised and trying to produce returns.

Aidan Flanagan is the safety and capacity manager for Airports Council International Europe. “We’re not in an immediate shock stage.” The market is now stable, with levels that are lower than those in 2019, but still stable.

In July, the European Commission stated that 50% was needed to maintain airport capacity. This is a decrease from normal levels of 80%. The European Commission granted exceptions to allow airlines to not reach 50%, while maintaining strict travel restrictions like quarantine.

A request for comment was not immediately answered by the Commission.

SIX WEEKS TO RESPOND

Once travel restrictions are lifted, Asian carriers will have to boost flying to the European Union within six weeks or risk losing slots even if demand is slow to return.

Lara Maughan, IATA’s Head of Worldwide Airport Slots, stated that it was unreasonable for people to not operate when the demand isn’t there. It is only a short period of time they can use to calibrate the entire operation.

René Maysokolua, managing director of German airport slot manager FLUKO, said his organisation had been informed that some Asian countries were telling European airlines they would need to fly 50% of the time or risk losing their slots in retaliation for the EU rules.

According to an industry source, South Korea, Hong Kong, and Singapore are taking a tougher line against European airlines.

Officials in Singapore and Hong Kong have confirmed that reciprocity provisions exist, but they declined to discuss specific cases.

Korea Airport Schedules Office declined to comment on a request by Reuters, however Korean Air, an affiliate of the nation’s slot work group, has confirmed that the provision are in place.

The United States announced Thursday that it would be more permissive in its winter season rules than the European Union for international airlines, despite the possibility of conflict between Asia and Europe.

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