Lufthansa, the German airline, has reignited the debate over competition in Europe’s crowded aviation sector as Arabian Gulf carriers step up their expansion across the continent.
Europe’s second largest carrier, which is embroiled in a pay row with pilots threatening to strike at home, faces increased competition from route expansion by regional carriers.
“We all know that one of the competitive benefits of the Gulf carriers is the environment that was created by the governments here,” said Carsten Schaeffer, a regional vice president of sales and services at Lufthansa, during an event in Dubai on Wednesday. “If you compare that to the European environment, it is much more difficult to operate. We think this gives us a competitive disadvantage.”
Mr Schaeffer cited taxes on aviation and fuel among other challenges they face.
“We have to tell our politicians, and specially in Germany and Austria and around Europe, that we want to have good competition for the customer,” he added.
Said Aage Dünhaupt, Lufthansa’s spokesman: “Aviation is seen in Europe as a golden cage where you can pull out money.”
Gulf carriers including Emirates Airline and Etihad Airways are adding European routes amid rising competition between carriers from the region and beyond. The budget airline Ryanair on Monday blamed intense competition after it reported its biggest third-quarter loss in five years.
At the same time, emerging aviation hubs such as Dubai, Doha and Abu Dhabi are picking up increasing market share at the expense of more established European hubs, including London Heathrow and Paris Charles de Gaulle.
Saj Ahmad, the chief analyst at StrategicAero Research, said that while some European carriers “love to blame” Gulf airlines, they seldom consider their own inefficiencies.
"EU airlines thrived for decades on state aid and languish today because of their inefficient and outmoded structures," said Mr Ahmad. "Airlines like Emirates are industry bellwethers because they have world-class management and operate as a paragon of airline efficiency."
Emirates has long refuted claims that it benefits from unfair subsidies. In a 139-page report published in 2012 it claimed that more than 18,000 jobs in Germany were dependent on the economic activities of the carrier, while the value of money spent by incoming tourists carried by Emirates exceeded €1.6 billion (Dh7.94bn) each year.
Mr Schaeffer said that Emirates was regarded as more of a direct competitor in Europe than Etihad, despite the recent expansion of the Abu Dhabi-based carrier through its equity alliances,
“It’s very interesting to see how Emirates is approaching the business and approaching a continent like Europe and how Etihad does it,” said Mr Schaeffer.
Etihad’s growth has been defined by the acquisition of minority stakes in other carriers. These include Air Seychelles, Air Berlin, Virgin Australia, Air Serbia, Ireland’s Aer Lingus, India’s Jet Airways, and Etihad Regional — formally known as Darwin Airline.
On Sunday, Etihad said it had entered the final phase of due diligence for a possible investment in Alitalia, the loss-making Italian carrier.
Emirates, which flies to 34 destinations in Europe, has said that it would double its flights to Dublin later this year. It is also flying its A380 aircraft to Zurich.
Meanwhile, Etihad, which flies to 32 destinations in Europe, plans to start daily non-stop flights to Zurich. Etihad Regional has also said it would operate four flights per week between Geneva and Stuttgart in Germany
“Gulf network carriers are serious competitors in many markets,” said Will Horton, an analyst at the Centre for Aviation. “They often serve more major markets with a better product and greater efficiency due to fleet, labour and the superior economics of long-haul to long-haul transfers.If they are a threat they are also an opportunity for a partnership, as Air France and many other carriers have shown.”
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England (15-1)
George Furbank; Jonny May, Manu Tuilagi, Owen Farrell (capt), Elliot Daly; George Ford, Ben Youngs; Tom Curry, Sam Underhill, Courtney Lawes; Charlie Ewels, Maro Itoje; Kyle Sinckler, Jamie George, Joe Marler
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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