Unlevel playing field? Ah yes, you mean protectionism

Abstract

The competitive threat of the Gulf carriers has been increasingly answered in Europe by protectionist measures. This policy was justified by allegations of unfair competition and an unlevel playing field. Indeed it is obvious that the playing field for the competition between European and Gulf carriers is unlevel. The main cause however, is the location of the Gulf carriers' home bases that enable them to develop long-haul hourglass hubs and to benefit from technological economies of scale of a modern long-haul wide-body fleet. In this respect, unit costs of for example Emirates are not unusual if one takes into account these network and fleet characteristics. The other way around, European carriers have to operate from hinterland hubs and are consequently confronted with costly short-haul feeder systems due to the location of their home bases in the European market. All in all, the unlevel playing field is primarily caused by Ricardian comparative advantages of States in the Gulf region. The playing field is further tilted by EU policy measures to the detriment of the European network carriers. The third and least important category of factors that also tilt the playing field emerges from the economic and institutional conditions in the Gulf States. In contrast with the European approach these conditions work in the Gulf carriers' favour. Protectionist measures in Europe are primarily justified by this third and least important category.