Air Transport Liberalization in Europe: The Progress So Far

750376PDFJournal ArticleAirlinesAir transportation policyInternational compactsInternational relationsInternational bordersEconomic conditionsEconomic impactsCase studiesEuropeMorrell, PeterCranfield UniversityNTL-AVIATION-AVIATIONNTL-AVIATION-Aviation Economics and FinanceNTL-AVIATION-Aviation Laws and RegulationsNTL-AVIATION-Aviation Planning and PolicyNTL-ECONOMICS AND FINANCE-Economic ImpactsUS Transportation CollectionThe gradual liberalization of intra-community air services began when Europe's airlines were going through a profitable period (1983-1989), but the more fundamental changes arising from the second (effective November 1990) and especially the third (effective January 1993) liberalization packages occurred at a time when economic recession and a downturn in demand growth pushed many airlines into deficit and several into a loss making spiral. This paper considers recent research that has attempted to distinguish responses and actions that would have occurred anyway from those that arose directly as a result of the liberalization process and the Community liberalization. It thus seeks to draw some preliminary conclusions as to the success of the EU measures. The scope of the analysis will be restricted to cross-border intra-European air services. It is based on extensive research carried out by the author and a team from Cranfield University over 1995 and 1996. This included desk research, a survey of and interviews with EU airlines and aviation authorities, and five more-detailed airline case studies. This has been updated to take into account more recent developments, especially regarding new entrant airlines. However, many of the airlines' strategic changes were more in response to developments in global rather than EU markets. Consumers have benefited from greater competition in promotional fares, and more dynamic pricing tactics overall have led to higher intra-EU traffic growth in the early 1990s than would have been the case without liberalization. There was also a substantial growth in the number of EU cities served by non-stop services, and some encouraging trends from new entrant airlines in some countries. On balance, it is argued that the net result has been disappointing; but this is hardly surprising given the timing of the final stage of liberalization in the middle of an economic recession, the concern of the larger airlines with more global events, and the time needed to change some of the more deep-seated structural barriers, such as airport slot availability, input market monopolies and state aids. References, 20p