COVID-19 crisis exposes imbalance in EU state aid for aviation sector

August 07, 2020

Dr Steven Truxal, a Reader in The City Law School, says the COVID-19 crisis has exposed an imbalance in EU state aid for the aviation sector.

In his article, "State Aid and Air Transport in the Shadow of COVID-19", published in a special issue of Air & Space Law, Dr Truxal investigates legal issues in the context of temporary state aid measures applied to different air transport stakeholders (airlines, airports, air navigation service providers and aircraft manufacturers) in the current crisis. He gives a general overview of EU state aid law as applied in the sector before discussing specific measures taken in regard to coronavirus.

The article identifies the extent to which individual EU states extend support to stakeholders, and under what circumstances. In conclusion, Dr Truxal reflects on the role of the State and the flexibility of EU state aid law in a time of unprecedented crisis.

Dr Truxal argues that given the unavailability of private recapitalisation in this time of great uncertainty, state grants, loans or other guarantees may offer the only means of support for hard-hit European airlines to survive in a market which the International Air Transport Association (IATA) estimates will suffer a loss of €314bn.

He writes that "when times are good, fewer airlines in liberalised and deregulated markets will be protected at all costs from the risks and opportunities associated with the free market, while states may seek to protect some air carriers at any cost in times of crisis".

Citing examples of Germany's support for Lufthansa and France's aid for Air France, Dr Truxal has identified examples of public support that come with strings attached. As conditions of state aid, Lufthansa must divest in airport slots and Air France should become environmentally friendly.

Dr Truxal notes that States can be seen as seizing "the opportunity to promote the green agenda with climate targets attached as conditions to state aid, whereby accelerating green innovation in air transport".

Dr Truxal suggests that "if airlines do not become 'greener', they could risk being replaced by other forms of transport on short haul markets. States may choose to invest in high-speed rail links."

Dr Truxal's specialist research focuses on competition and environmental regulation of air transport, and the link between market competition and the environment.
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City University London

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