Webinar Synopsis: The Impact of COVID-19 on Competition in the Air Transport Sector

Urs Haegler joined speakers from DG COMP, EU Travel Tech and Reed Smith to discuss antitrust in the aviation sector in a webinar organized by Concurrences.

The magnitude of the COVID-19 crisis is unprecedented and very different from past crises. The aviation sector is among the hardest hit by the pandemic, as it is estimated to have lost 3 billion passengers compared to 2019. International passenger traffic is down by 65% while domestic flights have dropped by 40%. Naturally, airports have been similarly affected, as well as aircraft manufacturers. It seems that the road to recovery will be very long. Demand will be slow and hard to recover until at least 2024.

The policy response to the crisis, particularly in the form of State aid, has been very swift both in the EU and worldwide. The European Commission has already authorized more than 33 billion euros of State aid to airlines under the Temporary Framework. However, there have been discrepancies between Member States, both in absolute and relative terms, in the amounts of State aid granted, which may distort competition in the internal market. Conditions imposed on the aid recipients will undoubtedly continue to be the subject of intense debate.

Additionally, the COVID-19 crisis presents a challenge to traditional enforcement in merger and antitrust proceedings. Determining the correct counterfactual is now extremely difficult, as illustrated by the investigation of the Atlantic Joint Business Agreement, which the UK Competition and Markets Authority has suspended with interim measures adopted until 2024.

There has been a fair amount of consolidation in the air transport sector even before the crisis. This trend will likely continue as a result of the COVID-19 bankruptcies, especially once State support is pared back. Against that background, competition authorities will have to decide how to take into account the impact of State aid on the parties and their rivals. Likewise, the crisis may require a modified stance towards the failing firm defense, as the air transport market of the future may not be able to “support” the same number of carriers as in the past.

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