Protection against subsidies and unfair pricing practices which cause injury in the air transport sector

This regulation sets out the procedure for protecting against pricing practices of and subsidies to non-European Union (EU) air carriers which cause injury to the EU industry.

ACT

Regulation (EC) No 868/2004 of the European Parliament and of the Council of 21 April 2004 concerning protection against subsidisation and unfair pricing practices causing injury to Community air carriers in the supply of air services from countries not members of the European Community [See amending act(s)].

SUMMARY

This regulation was approved following the air transport crisis at the end of 2001 that led some governments outside the European Union (EU) to subsidise their national airlines, while the EU industry is subject to strict rules on government aid.

The regulation allows redressive measures to be imposed when non-EU air carriers are subsidised directly or indirectly or when they carry out unfair pricing practices on one or more routes to or from the EU, thereby causing injury to the EU industry. These measures preferably take the form of duties and are imposed by regulation and enforced by the EU countries themselves.

According to the regulation, a subsidy exists when a government, regional body or other public organisation makes a financial contribution that confers a benefit. It may take the form of:

• grants, loans or equity infusion, potential direct transfer of funds or the assumption of liabilities;
• revenue that is otherwise due but which is foregone or not collected;
• the supply of goods or services other than general infrastructure, or their purchase by a public body;
• payments by a public body to a funding mechanism or the entrusting to a private body of one of the functions described above.

To be subject to redressive measures, the subsidies must be limited to an industry or group of enterprises or industries within the jurisdiction of the granting authority.

An unfair pricing practice exists where non-EU air carriers benefit from a non-commercial advantage and charge fares that are sufficiently low to cause injury to competing EU air carriers. The regulation lays down elements to take into account when fares are compared.

Before proceedings are initiated, it must be shown, by the existing facts that injury is being caused. The determination of injury must be based on positive evidence and involves an examination of the level of fares charged, their effect on EU fares and the impact of the air services concerned on the EU industry.

An investigation is initiated when a written complaint is lodged by the EU industry or on the Commission's own initiative. Where sufficient evidence exists, the proceeding is initiated within 45 days of the lodging of the complaint, but this period may be extended by up to 30 days if there is a bilateral agreement. Notice of the initiation of the procedure must be published in the Official Journal and include the details specified in the regulation. The Commission must notify interested parties. The Commission has 45 days within which to inform the complainant if insufficient evidence is presented.

This investigation should be concluded within nine months of proceedings being initiated. An extension may be allowed if a satisfactory resolution of the complaint appears imminent or if additional time is needed in order to achieve a resolution that is in the EU interest. Interested parties may be granted a hearing. However, if they refuse access to or fail to provide necessary information within the appropriate time limits, the final findings may be made on the basis of facts available.

Four possible scenarios may be the result of an investigation:

• provisional measures: these may be imposed for a maximum period of six months if it is determined that injury is being caused and that the EU interest calls for intervention to prevent further such injury;
• termination of the proceedings without measures being imposed: this happens when the complaint is withdrawn or a satisfactory remedy is obtained;
• definitive measures: these are imposed when it is established that unfair pricing practices or subsidies which cause injury exist. The level of measures imposed must not exceed the level of the subsidies or the difference between the fares charged by the two air carriers concerned (EU and non-EU);
• undertakings: an investigation may be terminated without measures being imposed if the public authorities or non-EU air carrier concerned undertake to eliminate the subsidies and revise its prices in order to prevent further injury. In the event of an undertaking being breached, a definitive measure will be imposed.

If the circumstances warrant, the Commission may review the imposition of the measures in their initial form with a view to repealing, modifying or maintaining them.

Last updated: 22.03.2011