German, French Air Accords With Russia Face European Union Lawsuit Threat

The European Union threatened lawsuits against Germany, France, Austria and Finland for allowing Russian fees on EU airlines that fly over Siberia, spotlighting a hurdle to Russia’s bid for World Trade Organization membership.

The European Commission said the four countries’ aviation agreements with Russia may violate EU rules by including provisions on Siberian overflight charges. European airlines pay the fees to Russian carrier OAO Aeroflot for the right to fly between Europe and Asia.

“Such provisions may be in breach of EU antitrust rules and could lead to competition distortions to the disadvantage of both EU airlines and consumers,” the commission, the 27-nation bloc’s regulatory arm, said in a statement today in Brussels.

Russia is the only country in the world to charge for overflight rights and the fees affect flights between Europe and Japan, China and South Korea by airlines including Air France- KLM Group and Deutsche Lufthansa AG. The policy is a relic of the Cold War, when Russian airspace was out of bounds and Russia excluded Siberia in return for a fee.

The EU says Russia has failed to follow through on a 2006 accord to end the fees, which U.S. carriers are spared because they don’t fly the trans-Siberian route. The charges, which the commission says cost European carriers about $420 million in 2008, have been among the obstacles to EU approval of Russia’s bid to join the WTO.

Legal Threat

Today’s legal threat involves an initial warning from the commission to the German, French, Austrian and Finnish governments through a “letter of formal notice.” This process can lead to a lawsuit at the European court after a second commission warning letter.

In addition to targeting the provisions on Siberian overflight charges, the commission says the four aviation agreements with Russia violate EU law by failing to apply the general terms equally to all carriers based in the bloc. This is required under Europe’s “open-skies” rules.

Among other things, the open-skies rules ensure that a takeover involving two carriers based in different EU nations doesn’t lead to the loss of traffic-route rights. Russia has threatened to deny Austrian Airlines AG flight rights following its takeover by Lufthansa, according to the commission.

The commission is examining whether to start similar infringement cases against other EU countries, said Helen Kearns, the commission’s transport spokeswoman. She said “several” more such cases are likely before the end of the year while declining to speculate about the nations that would be targeted.

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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