The Spanish Government is calling for a joint EU-wide response to airline bailouts. European economy minister Nadia Calvino said in an interview today that a more joined-up approach is needed to “level the playing field.” She further raised concerns about the future competitivity of the European aviation market if EU airline bailouts are allowed to continue in isolation.
A joined-up approach is needed
As airlines around Europe reach out for support from their various national governments, Spain’s economy minister Nadia Calvino has called for a more joined-up approach. In a statement today, she raised the idea of a ‘European Reconstruction Fund’ to ensure that no EU country comes out of the crisis more in debt than any other.
In particular, she has called for a leveling of the playing field in regards to airline bailouts. She says that countries with deeper pockets should not be allowed to give higher levels of aid to their airlines where poorer nations are unable to respond similarly. During an interview on Bloomberg TV, Calvino said,
“All these large carriers are not one nationality or another, they are European carriers. And that’s why we are strongly defending that we would provide a level playing field and, with different sorts of support, provide a similar level of funding and similar level of credibility and strength to the different operators so that we do not create competition problems at the end of the day.”
Calvino stated that the Spanish government is confident that economic recovery will be rapid through the second half of the year, although it will have been severely damaged. She further reaffirmed Spain’s own commitment to supporting its airlines, but raised questions over the future competitivity of EU aviation in general if bailouts are allowed to continue autonomously.
Is the playing field level?
It would seem that the Spanish minister’s take on the situation is reasonably accurate. Although Spain recently granted a €1bn ($1.1bn) bailout to its own IAG airlines Iberia and Vueling, this pales into insignificance when compared to the €9 billion ($9.7bn) currently under negotiation for Lufthansa.
Already, EU airlines have been told they must continue to issue cash refunds during the coronavirus crisis in order to remain compliant under EU 261. While some carriers are incentivizing passengers to accept credit vouchers instead of cash refunds, passengers still have the right to ask for their money back.
This is only adding to the cash crunch at airlines, who are estimated to have collectively requested some €30bn ($32bn) in state support in various forms. Last week, European low-cost giant Ryanair hit out at these requests, calling it ‘state aid doping’ and branding the support ‘unfair.’
Calvino further said that,
“The European Commission is keeping a very close eye to make sure there is no breach of the competition rules and that we don’t end up with a very unlevel playing field because of the different capacity of government to support the different airlines. They are all hit in the same manner. We should provide a European response.”
While the current situation is that bailouts are very much happening on a national level, both Ryanair and the Spanish minister raise a valid concern. How can airlines remain competitive post-COVID-19 if they’ve secured such wildly different levels of support during this challenging period?
Do you think a more joined-up approach to EU airline bailouts is necessary to ensure a healthy aviation industry going forward? Let us know your thoughts in the comments.