The US Department of Transportation (DOT) has announced plans to curtail European Union-based carriers' US wet-lease operations citing a lack of progress in removing barriers that would give US-based airlines equal access to the EU wet-lease market.
The trade dispute stems from EU regulation 1008/2008 which only allows non-EU carriers to wet-lease to EU carriers for an initial duration of seven months, with the opportunity for one extension for another seven-month period (i.e. a maximum total of 14 months).
In a show-cause order issued on February 21, the DOT said 1008/2008 had unfairly benefited EU-based operators at the expense of their US-based competitors given the department's policy has, until now, been to grant unrestricted wet-lease waivers to both US and foreign operators in the interests of boosting flexibility and commercial opportunities for all.
On the back of US airlines' repeated criticism of this skewed playing field, the DOT said it has continuously sought to resolve the matter with the EU since 2012. Following six years of talks, the drafting of the text of a wet-lease agreement between the US and EU was finally reached in February 2018. However, for the deal to become binding, the EU said it would require each of the EU member states' consent. Since that time, the DOT said no further progress in resolving the matter has been made leading it to take action to protect US interests.
"Since 2012, the US Government has worked with the EU in a spirit of cooperation and in good faith to resolve this matter. Throughout this period, the Department has exercised regulatory forbearance in the interest of promoting a satisfactory outcome. Now, in the face of an unreasonably excessive delay by the Europeans in implementing a mutually agreed-upon resolution, and the competitive disadvantage suffered by US carriers in the absence of such resolution, the Department can no longer view such continued forbearance as consistent with the public interest. Specifically, in the circumstances presented, we have tentatively determined to limit EU-to-EU carrier wet-leases in an exact manner that US carriers face in wet-leasing to EU carriers," the DOT's Assistant Secretary Aviation and International Affairs, Joel Szabat, said.
Among the measures to be taken include the termination of authorisations for certain EU-EU wet-lease operations, specifically those whose duration has exceeded 14 months. These are:
- Cargolux Italia wet-leasing from Cargolux (Granted on October 3, 2012);
- Aer Lingus wet-leasing from ASL Airlines Ireland (Granted on December 18, 2013);
- Austrian Airlines wet-leasing from Tyrolean Airways (Granted on July 29, 2014) (no longer relevant);
- Lufthansa wet-leasing from Lufthansa CityLine (Granted on September 25, 2015);
- Eurowings wet-leasing from SunExpress Deutschland (Granted on March 27, 2016);
- TAP Air Portugal wet-leasing from White (Granted on September 9, 2010) (not currently active);
- TAP Air Portugal wet-leasing from PGA Portugalia Airlines (Granted on August 11, 2008) (not currently applicable to US routes);
- Air Europa wet-leasing from Privilege Style (Granted on March 30, 2013) (not currently active).
Affected carriers will have until March 30, 2019, to end these operations.
In addition, the DOT plans to limit all future EU-EU wet-lease authorizations to a total collective duration of 14 months, in effect mirroring current EU policy.
While objections and submissions are due by March 10, 2019, the DOT would be prepared to drop all the proposed measures should the Europeans uphold their side of the bargain.
"The Department emphasizes that its goal is the satisfactory resolution of this wet-lease issue. If the [European] Commission takes the necessary steps to proceed to the provisional application of the standalone Wet-Lease Agreement negotiated in February 2018, we are prepared to vacate this order or simply not finalize our proposed tentative decision," Szabat added.
