Airline Deregulation - Successful Airline Deregulation in Europe

Successful Airline Deregulation in Europe

The economic liberalisation of air travel was part of a series of deregulation moves based on the growing realization that a politically controlled economy served no continuing public interest. U.S. deregulation has been part of a greater global airline liberalization trend, especially in Asia, Latin America, and the EU. The effects of liberalization in Europe are undoubtedly quite different in scope and magnitude than in the US.

When the architects of the European Union were devising ways to bring the continent’s nations closer together, they probably didn’t think much about airlines. But few businesses have contributed more to cross-border interaction among Europe’s 450m citizens.

From 1993 to 1997, the European Union phased in a continent-wide open skies regime that’s dramatically lowered fares, expanded access and boosted tourism, commerce and movement within the now 25-member market. Perhaps most remarkably, these developments haven’t ravaged the fortunes of employees or destroyed the financial performance of airlines to the same degree they have in North America. While airlines like Sabena have died and workers like those at Swissair suffered, many of the continent’s largest airlines avoided the sweeping restructuring that their American counterparts are still undertaking. Many carriers are hiring and both legacy and low-cost airlines are making money.

In many ways, Europe is a dream market for airlines. Average household incomes are high, workers receive long holiday breaks and high petrol taxes encourage people to travel by air rather than car. Moreover, the continent is dotted with culturally-rich cities that tourists love to visit and pleasant-weather beaches that crowd with vacationers during summers. Many Europeans even have second homes in other E.U. countries.

No group of airlines has better taken advantage of these favorable market characteristics than the low-cost carriers spawned by deregulation. Not all are profitable or sustainable—as many as 60 still exist in various niches throughout the continent—but the biggest and the best are carrying enormous volumes of traffic. The European Low-Fares Airline Association, an advocacy group, says Europe’s LCCs now transport more than 100m passengers a year, about as many as American Airlines. And many LCCs serve a large number of cities.