‘Europeans for Fair Competition’

...urges the European Commission to enact the Aviation Package

Luxembourg, 6 June 2016Europeans for Fair Competition (E4FC) is a coalition of concerned Europeans who have unified across EU member nation boundaries and labor-management lines with the goal of establishing a level playing field with countries that subsidise their airlines in violation of European air service agreements, notably the United Arab Emirates and the State of Qatar.

Evidence shows

...that the nations of Qatar and the United Arab Emirates have injected over €39 billion (between 2004-2014 alone) in government subsidies and benefits into their state-owned airlines. These nations and their subsidised airlines have used these funds to develop services and massive capacity between Europe and Asia via their hubs and are proceeding with a certain number of strategic investments in European airlines to feed their own operations, capture, and shift market access. European airlines and their employees can compete with Middle Eastern airlines directly, however, it is an entirely different matter for them to compete with Middle Eastern governments that heavily subsidise their state-owned airlines.

The "European Aviation Strategy"

In December of 2015, the European Commission introduced a comprehensive strategy for the European aviation sector. This strategy, commonly known as “European Aviation Strategy”, includes “fair competition” principles and language introducing new methods of addressing unfair practices from third countries and third-country operators through adoption of comprehensive EU- level agreements.

Call for action

It is vital that the EU continues to pursue a comprehensive policy that strengthens the accessibility of European hubs to safeguard connectivity and consumer choice long term. We, therefore, call on the EU Commission and Transport Council to deliver to the European Commission a mandate to negotiate with third countries EU level Aviation Agreements that include strong provisions guaranteeing fair competition. We also call for the inclusion of the oversight and enforcement procedures necessary for any future air services agreement to be concluded between the EU and third countries, notably the State of Qatar and the United Arab Emirates, where massive government subsidy distortions are already wreaking havoc in the European aviation market. We finally call on the Commission to implement its Aviation Strategy by promoting the adoption by the European Institutions of a new defence instrument guaranteeing protection of EU air carriers against subsidisation and unfair pricing practices from third country airlines

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Bombardier: $1 billion bailout, 7000 fired

Back in October, Quebec put taxpayers on the hook for a $1 billion bailout of planemaker Bombardier (which was having one hell of a hard time creating a buzz around its CSeries commercial jet program).

Bombardier has been around for nearly 8 decades and employs more than 40,000 people in the province. The company’s role in the provincial economy is “incalculable,” Quebec’s Economy Minister Jacques Daoust said last year. How can I let them go? he asked.

For its money, Quebec would get a 49.5% stake in a new business that will own the assets and liabilities of the CSeries commercial jet program (which isn't exactly going well). In exchange, the company promised to manufacture the aircraft in the province for at least 20 years.

“How confident is Quebec that this will fan out for the economy and taxpayers? That’s what we don’t know, Paul Boothe, a former senior Canadian official

...who was the federal government’s lead negotiator with the domestic units of GM during bailout talks in 2009 said at the time.

Well, now we do know. On Wednesday, Bombardier announced it’s cutting 7,000 jobs as part of a “global workforce optimization.

“Impacted positions are mostly based in Canada and Europe,” the company said this morning, after reporting results that missed estimates on both the top and bottom line. Here’s the breakdown:

So obviously that sounds bad, but don't worry because the job losses will be "partially offset" by hiring in "certain growth areas." Like the CSeries program. Which is "growing" so fast that the company had to take a $1 billion bailout from the provincial government to shore it up.

"Production rates for some models have been modified,"
Bombardier goes on to say, in an attempt to explain the layoffs, "due to macroeconomic conditions." For those who don't read a lot of quarterly reports, that's a polite way of saying this: "demand is really, really soft."

The company says the CSeries program has "generated new jobs at the Bombardier facility in Mirabel, Québec," although the number of new jobs isn't specified nor does the company indicate what the net job creation (or, more likely, "job destruction") will be in Canada after the "optimization" is implemented.

As for the company's 2016 outlook, revenue guidance looks well short of estimates at $16.5-17.5 billion (consensus was $18.2 billion), while FCF usage is generally in line at between $1 billion to $1.3 billion, although if it comes in at the high end, that will be close to the highest analyst estimate. The company burned $1.82 billion in 2015. Here's the full guidance breakdown:

On the bright side, Bombardier and Air Canada announced today that they've signed a Letter of Intent for the sale and purchase of 45 CS300 aircraft with options for an additional 30 CS300 aircraft, including conversion rights to the CS100 aircraft.

Oh, and the company is going to try a reverse split to make it seem like its shares aren't worthless.

So there you go Canada, Bombardier thanks you for the $1 billion you gave it. Any time you want to fork over some more money in exchange for thousands of layoffs, make sure to let the company know. They'll be happy to oblige.


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‘Return on investment’ thinking
in aviation


These times are characterized by so-called “return in investment” thinking. On all fronts, the focus is on profits and shareholder value. This not only applies to companies, but also to healthcare and education. We are shifting increasingly from the Rhine model, where government, employers and employees are willing to work together, to the Anglo-Saxon model in which self-reliance, market forces, freedom and limited social security are paramount.

In practice this means companies are taking less and less responsibility for their employees and would actually prefer to shed their obligations as an employer. In the Netherlands, this has resulted in a nearly 1 million self-employed workers, a number that has grown significantly since the beginning of the economic crisis. Many of these workers have not become freelancers of their own free will. They would like to have more social security, if only to buy a house or maintain a family. Many of them are also “bogus self-employed”: they work exclusively for one client and there is a relationship of authority since they perform the same work as employees of this particular client. This is against the law, but who enforces the legislation?

In collaboration with the University of Ghent and the European Sectoral Social Dialogue Committee for Civil Aviation,

ECA has extensively researched bogus self-employment among pilots. The results were compiled in a report that was officially released during the recent ECA conference on “Atypical forms or aircrew employment in the European aviation industry” in Paris.

The results of the research are alarming: more than 1 in 6 pilots in Europe are atypical employees: they work through an agency, as a freelancer or based on a zero-hour contract. 7 out of 10 self-employed pilots work for a low-cost carrier. This so-called “employment” is often used to hide the fact that they are regular employees; after all, they perform the same work as pilots with a fixed contract and therefore there is a relationship of authority between self-employed pilots and the airline that hires them. This bogus construction creates unfair competition and distorts the market.

Pilot quote from the report:

“Competition between pilots (too many pilots on the market) is due to flight schools that train too many people and make false promises. I think the difference in wages and working conditions is caused by the large number of pilots who are looking for work, and who all have a huge debt.”

At the beginning of their career young pilots find themselves in such a weak position that they have to accept poor working conditions, because otherwise they will never land their first job. Airlines take advantage of the surplus of low-hour pilots and make them pay their own type rating or - even worse – their type rating plus line training under the pretext of “gaining experience”. In Europe this is possible because of loopholes in the legislation. Legislation in the field of social security and safety should therefore be adjusted to ensure that above-mentioned models do not jeopardize the safety and wellbeing of crews and passengers.

The ECA research also shows that bogus self-employment affects flight safety. Almost 50% of the self-employed pilots say they encounter difficulties in following instructions of the company because these instructions are in conflict with flight safety.

Self-employed pilots are dependent on the airline that hires them and will therefore not report sick when they are not fit to fly, and will not raise safety concerns, fearing their client will no longer use their services. They have no leg to stand on, since the airline knows there are dozens of low hour pilots eager to joint and bring in money by paying their own type rating (at a multiple of the cost).

Pilot quote from the report:

“I worked for a low-cost airline and it was horrible. Something has to be done in terms of legislation. People dare not to call in sick, could be fired within a moment's notice, and management uses subtle threats to push things through. Terrible working conditions, low pay and zero-hour contracts. For cabin crew, the situation was even worse.”

Pilot quote from the report:

“After thirty years of flying, I have noticed that aviation is not what it used to be. I can not recommend anyone to become a pilot, unless you can get a job with a national airline. Aviation managers violate the law and expect the same of young pilots. As a pilot in Europe you have no job security, no home base for your family and in certain EU member states you are exploited by low-cost airlines. It's an endless race to the bottom that will require its toll sooner or later. Strong demotivation, fatigue, less training and pushing boundaries are many methods used to reduce costs and to pay bonuses to managers. If pilots wouldn't love flying so much, the current working conditions mean there would be no more planes taking off.”

The ECA research makes abundantly clear that bogus self-employment in aviation is more than the avoidance of social security and taxes: the sector's safety is at risk.

The report ends with a call to all stakeholders to take the concerns of airlines and crews seriously. Airlines need flexibility, staff wants more security and there are concerns about unfair competition, not only between companies but also between the pilots themselves. Last but not least, legitimate safety issues give cause for concern. A fair balance between safety provisions and rights of employers and employees is therefore very important.

Nienke Groenendijk, March 2015

Source: Atypical employment in aviation: final report

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