© Reuters. A plane of Germany's air carrier Lufthansa takes off at Fraport airport in Frankfurt

By Julia Fioretti

BRUSSELS (Reuters) - The European Union proposed new rules on Thursday to more effectively tackle alleged unfair competitive practices by foreign airlines as it seeks to ensure European carriers can withstand fierce competition overseas.

The move comes after repeated complaints from some European airlines, notably Air France KLM and Lufthansa, about Gulf carriers receiving illegal government subsidies, charges Emirates, Qatar Airways and Etihad all deny.

The proposal, which needs to be approved by the European Parliament and EU member states before becoming law, would allow EU governments and airlines to submit complaints to the European Commission about any alleged discriminatory practices they face in non-EU countries or illegal subsidies benefiting non-EU airlines.

Should the Commission find that the practices of a third country or airline are causing injury, or threat of injury, to European airlines it will be able to impose financial penalties or suspend some ground and other services, but not flights, and rights of the overseas airline in Europe.

"We want to ensure that Europe remains a leader in international aviation, well connected to fast-growing markets, with efficient European skies," EU Transport Commissioner Violeta Bulc said in a statement.

The proposal will not interfere with bilateral air services agreements between countries setting out where and how often airlines can fly.

Germany and France have previously called for such rules but some other EU member states have been staunchly opposed to the idea on the grounds they could harm bilateral deals and reduce connectivity in Europe. Many also saw it as a protectionist move to shield uncompetitive European carriers, something the Commission denies.

"In aviation there is never going to be a level playing field," an EU official said. "We're not here to protect those airlines if they have not put in place a good business model."

ACI Europe, representing Europe's airports, said the proposed regulation should ensure equality of opportunity.

"This will hopefully allow us to move on from mere allegations and somewhat sterile debates to established facts and legal action, where needed," said ACI Europe's Director General Olivier Jankovec.

Dubai-based Emirates said the aim should be balanced and non-discriminatory regulation serving as a catalyst for increased European liberalization.

"As a financially transparent carrier with a 30-year track record of delivering air connectivity to and from Europe, Emirates welcomes the European Commission proposal to promote fair competition in the global aviation market," a spokeswoman for the airline said.

The Commission also published guidelines clarifying the application of EU ownership and control rules that limit non-EU investors' stakes in European airlines to 49 percent.

Investments by foreign airlines in recent years, such as Etihad's 29 percent stake in Air Berlin, have triggered suspicions that the control is actually being exercised by non-EU investors. The Commission sought to make clear how it assessed the exercise of control of an airline to bring legal certainty for foreign investors.