Public intervention in the air transport sector : distortion of competition or attainment of transport policy objectives?

Abstract

The need to maintain free and undistorted competition is recognized as being one of the basic principles upon which the European Community is built. By way of Community competition policy the Commission aims to help strengthen the competitiveness of European industry, ensure effective competition in the internal market and create the conditions for markets to function well whilst accounting for Europe's particular market economy. A key element of competition policy is State aid control. Open and competitive markets, however, do not preclude public intervention, in particular when it is deemed to be in the general interest or is aimed to achieve particular objectives, such as those of the Common Transport policy. The first Chapter of this thesis examines the general principles enshrined in the Common Transport policy since the inception of the then European Economic Community, by means of the Treaty of Rome in 1956. The events which established the Common Air Transport policy are in tum examined from which it can be concluded that it has been since the 1980s that particular attention was given to air transport policy. As with any other sector, the air transport sector has often faced financial problems and resort was always made to governments for their assistance. The latter, hesitant to see their national air carrier disappear, provided their airlines with the aid they required. It was realized by the Community that rules regulating the granting of State aid in the air transport sector were required. An examination of the said State aid rules and the 1994 Guidelines on the application of Articles 87 and 88 of the EC Treaty is followed by an analysis of the exemptions to the said rules which are established in Article 87(2) and (3) of the EC Treaty. Reference is made in the final Chapter to the effects of the 11th September, 2001, attacks in the US on the airline industry. The Commission realized that due to the unforeseen and exceptional circumstances, the objectives of the Common Transport policy were being frustrated and though not admitting it, and without changing any rules or regulations, allowed, in this situation, the granting of State aid and thus moved away from the strict control of State aid to airlines.