--Russia move breaches its WTO commitments says the European
Commission
--Finnish government says Russia withholds new over flight
rights over Siberia due to EU's emission trading scheme
--Nordic-Russian air-traffic talks complicated by trade spat
--Finnair alters summer schedule as it received fewer rights to
fly over Siberia than expected
By Christina Zander
STOCKHOLM--Russia is withholding new "free of charge" rights for
European Union-based airlines to fly over Siberia in breach of its
free-trade commitments in protest against the inclusion of
international airlines in the EU's carbon-dioxide emissions trading
scheme, the European Commission said Thursday.
Russia and the EU had agreed in principle that all new over
flight rights issued to European airlines from January 2012 should
be free of charge, a condition of Russia's joining the World Trade
Organization in December last year.
"Unfortunately Russia so far has not lived up to its commitments
under the agreement," said Dale Kidd, a spokesman for Transport
Commissioner Siim Kallas.
Russia, along the U.S., China and India, is among the most vocal
critics of the EU's ETS. Under the EU program, any airline
operating at an EU airport must hold special credits to offset its
carbon-dioxide emissions since the start of this year. Airlines
have said their inclusion in the ETS, which already covered many EU
industries, will cost them billions of dollars annually.
In retaliation, China has already delayed approving Chinese
airlines' purchases of multimillion-dollar jetliners made by
Franco-German aircraft maker Airbus.
Russia has cited the dispute over the ETS as reason to ignore
granting airlines free over flight rights, said Silja Ruokola at
the Finnish ministry of Transport.
"That is how we gather the situation," Ms. Ruokola said. "You
can see that [the ETS] has an effect," she said.
In a further sign the trade spat is having a direct impact on EU
companies, Finland's state-controlled airline Finnair Oyj
(FIA1S.HE) confirmed it has had to alter its summer schedule
because it received fewer rights to fly over Siberia than it had
expected.
Rival Scandinavian airline SAS AB (SAS.SK) said while it hasn't
immediately been affected, there are doubts whether it will able to
save on yearly Siberian over flight fees of 100 million kronor ($14
million) a year in the future.
"As long as the ETS remains a problem, discussions about over
flight rights are not likely to move forward," said SAS spokesman
Hans Ollongren.
In addition, Russia's anger over the ETS has snarled up
negotiations between Moscow and the governments of Sweden, Denmark
and Norway about revising an air-traffic pact signed with the
Soviet government in 1957.
Talks about reworking the accord which regulates which airlines
are allowed to fly from Scandinavia to Russian destinations ended
last month without agreement partly because of Russia's frustration
over the ETS and will resume at the earliest in November, people
familiar with the situation said.
Russian government officials weren't immediately available for
comment.
Russia's WTO commitments include lifting the charges European
airlines for flights over Siberia completely by January 2014.
European airlines currently pay about 300 million euro a year for
the right to fly over Siberia, according to the European
Commission.
The Russian decision over over flight rights is particularly
painful for Finnair and SAS airlines which have counting on growing
their long-haul business to Asia, flying over Siberia, to help
counter intense competitive pressure on their operations in
Europe.
Finnair had expected to increase the number of its flights to
Asia. "We had hoped for another four [over flight rights] for the
summer season," said Finnair spokeswoman Arja Souminen. The airline
currently as 60 over-flight rights.
"There is very little that Scandinavian countries can do, seeing
as this (ETS) is something that has been decided on an EU level,"
said SAS's Mr. Ollongren.
Top executives from the world's leading airlines are meeting
this weekend in the Chinese capital Beijing under the auspices of
their industry body, the International Air Transport
Association.
IATA Director General Tony Tyler said earlier Thursday that the
escalating row over emissions trading won't be resolved in the near
term.
"I'd like to see good progress this year, but being realistic,
it's going to take a while," he said.
The EU said last month that a total of 10 airlines from China
and India failed to meet a March 31 deadline to report their 2011
carbon dioxide emission data, raising the possibility of penalties
or a ban from flying to Europe if they miss the next deadline in
mid June.
Write to Christina Zander at christina.zander@dowjones.com
Joanne Chiu contributed to this article.