Air transport liberalisation and the development of third level airports in France

The liberalisation of air transport in the European Union encouraged a proliferation of new entry airlines exploiting the opportunities offered by minor airports. This was particularly apparent in France where “third level” airports experienced growth associated with start-up airlines using low-capacity aircraft. A summary of these trends is followed by a detailed examination of the Centre-East District, which demonstrates that the aspirations of both airlines and airports have been compromised by recent restructuring of the French airline industry. Far from providing greater competition, deregulation has increased the quasi-monopoly of Air France as market forces proved to be stronger than liberalisation. As a result, many third level airports face an uncertain future, especially in the light of the terrorist attack on the United States and its likely effect on airline economics.     

Does liberalisation of air transport imply increasing competition? Lessons from the European case

The liberalisation of European airspace opened up unprecedented freedoms to Community airlines. This theoretically allows for increased competition. This article inquires into the quantification and the geography of the services offered in Europe that enjoy competition. Undoubtedly, competition appears to have increased but has certainly not become the general rule, notably because liberalisation has led to the creation of many new air routes operated by a single airline. Competition primarily benefits passengers in the large European cities, as well as those in peripheral regions that receive major tourist flows from the big cities in the northern parts of Western Europe.     

Air deregulation in China and its impact on airline competition 1994–2012

China’s air transportation has experienced rapid growth and major reforms in the past three decades, some of which have been partially successful and are still ongoing today. The paper aims to analyze China’s air deregulation experience over the last two decades and its impact on airline competition from a geographical perspective. After the establishment of the “Big Three” in 2002, the paper reveals that there has been a trade-off between the extent of deregulation and airline competition in China because the central government has tended to strengthen the “Big Three” rather than totally open the market to private and locally owned airlines. The paper uses each airline group as the basic unit of analysis and reveals that (1) the air market has been more concentrated in the “Big Three” as a result of the process of air deregulation; (2) airline competition in over two thirds of the airports and one half of the routes has increased in the last 18 years, but the core airports and trunk routes are chiefly dominated by the “Big Three”. The peripheral airports and thin routes have been operated by private and locally owned airlines; and (3) regionally, airline competition has occurred in most airports of the eastern region, and it is more intense than in the central and western regions. But even here, competition in the eastern region has however decreased in 1994–2012. The three main contributions of the paper are: (1) the use of two measures of competition in the airline market; (2) the analysis of the historical evolution of competition; and (3) an understanding the role of the geography of competition in the Chinese airline market.     

A Cournot model for analysing the effects of an open skies agreement

In the last decades there has been a gradual liberalisation of international air transport markets through the implementation of open skies agreements which seek the deregulation of the air transport industry and consequently the functioning of the market in a freer way. The objective of this work is to study the effects of an open skies agreement in order to understand if the airlines and the consumers will benefit after the market deregulation. With this purpose, we develop a Cournot model to compare the initial situation (without agreement) and the situation after the implementation of the open skies agreement.Based on the model developed we conclude that after market liberalisation the prices on international market segments where competition increases should decline, thus benefiting consumers. Regarding the incumbent airlines in the market, an open skies agreement should jeopardize the airlines that fail to operate new routes, leading to decreased profits.     

The effects of deregulation, changed customer requirements and new technology on the organisation and spatial patterns of the air freight sector in Europe

Customer requirements, new technologies and the deregulation and liberalisation measures of the last 15 years have had a significant influence on market structures in air freight transport in Europe. The study examines the sector using the concept of global production networks. It describes the reorganisation in various dimensions. Firstly, there is the development from single air freight forwarders to global networks of firms. Secondly, we find a reorganisation of inter-company relations. Thirdly, airlines around the world organise their air traffic as a hub system. This lends added importance to the selected hub airport, and puts pressure on them to enlarge. As spatial consequences there is greater competition among international airports.     

Airline franchising in Europe: benefits and disbenefits to airlines and consumers

Franchising has become an increasingly important commercial strategy for Europe's airlines as they seek to strengthen their position in the deregulated marketplace. This paper examines the practice of airline franchising in Europe since its inauguration by British Airways in 1993 and its subsequent adoption by most of the other major carriers. The advantages and disadvantages for both franchisor and franchisee airlines are investigated, drawing upon evidence from the operation of scheduled air services in Europe. Consideration is then given to the benefits claimed for consumers and the effect of franchising on competition. A generally positive picture arises, particularly in international markets. There are however incipient signs that where franchising leads to one major carrier becoming too dominant in its domestic market, the scope for competition and new entry is becoming suppressed.     

Airline competition on the route between Amsterdam and London

Although liberalization in European air transport business was formally completed with the implementation of the third package of the EU, today the free market effects of abandoning the bilateral system are not yet very manifest. The experiences in the United States indicate that it can last for over a decade before more or less stable competitive positions are set according to liberalized market conditions. The Amsterdam-London route was among the first routes which was liberalized on a bilateral basis. The development of airline competition on this route gives a rather good insight in what might be expected on other European routes the following years. In the ATRG paper, emphasis is laid upon the following competition characteristics: the number of airlines serving the London routes; the frequency offered by these airlines; the average aircraft size; the air fares charged. Special attention is paid to the relative attractiveness of the various airports in the Londen Area. Also the entrance of start-up carriers that offer no frills, no thrills services is covered.     

Local emission charges – A new economic instrument at German airports

In January 2008, charges were introduced at selected German airports aimed at reducing local emissions of nitrogen oxide and hydrocarbon. The charge is aimed at setting economic incentives to accelerate the introduction and foster the use of environmentally friendly engine technology and is designed to be revenue-neutral in the sense that it does not increase the airports' overall revenues from air traffic. To achieve this, the general landing fees need to be decreased by the amount of the emission charge. The introduction of this charge will have economic impacts on airlines and may have an impact on airline competition in the German air transport market. Case studies based on empirical data are presented for selected German airports. The results indicate that airline's finances will be affected differently by the emission charge, depending on the engines employed and on the aircraft population of the airport considered.     

The implications of environmental costs on air passenger demand for different airline business models

Various environmental measures, including both regulations and fiscal instruments, have been used at airports globally to reduce the impacts of aircraft noise as well as aircraft engine emissions. Internationally, it is recognized that the costs of environmental and social externalities of air transport must be internalized and paid for by the aviation industry and its users. The use of noise related charges or taxes, which theoretically should be based on their respective social costs, has been proved to be effective at some European airports. This research aims to investigate the impacts of environmental costs, through environmental charges, on air passenger demand for different airline business models. The paper presents the mathematical models measuring the social costs of aircraft noise and engine emissions as a basis for setting up environmental charges. Six intra-European short-haul routes in two city pairs, namely London–Amsterdam and London–Paris, are selected for the empirical analysis. The environmental charges are then hypothetically applied to airlines with two different business models, full service carriers (British Airways and Air France-KLM) and low cost airlines (EasyJet). The results show that the potential percentages of demand reduction for both leisure and business passengers would be higher for Easyjet's markets, although with less environmental cost per passenger.     

Low-cost airlines and airport competition

An important question from the viewpoint of competition analysis in the air transport industry is the extent to which low-cost airlines operating from a secondary airport compete with full-service airlines serving a main airport in a multiple airport region. In this paper we address the issue of the competition between full-service and low-cost airlines serving adjacent airports in the Greater London using econometric estimation of demand structure (own- and cross-price elasticities). Our analysis follows the methodology in (Pels, E., Nijkamp, P., Rietveld, P., 2000. Airport and airline competition for passengers departing from a large metropolitan area. Journal of Urban Economics, 48 (1), 29–45, Pels, E., Nijkamp, P., Rietveld, P., 2003. Access to and competition between airports: a case study for the San Francisco Bay area. Transportation Research Part A: Policy and Practice, 37 (1), 71–83). It is based on the nested logit model which we use to capture three key dimensions of passenger choice: air fare, surface-access costs and frequency. We obtained estimates of the own- and cross-price elasticities, which was the focus of our interest. On the basis of our understanding of the industry dynamics we find these estimates, especially of the cross-price elasticities, to be on the low side.     

Policy issues and planning of UK regional airports

The principal motivation for this paper is to examine the policy issues for UK regional airports within the air transport system with particular reference to airport airline relationships. The geography of airline route networks is considered a key factor that determines location of the pressure for infrastructure development. Regional airports policy is considered in this context. The problems of the resultant concentration of air traffic has largely been ignored up until now and so this paper seeks highlight the issues this presents to policy makers. The paper reviews the changing regional airport ownership patterns and examines a range of implications. It then explores the policy implications for the future regulation and development of the air transport system. The authors contend that regulation and the planning system are the only two remaining policy levers for government to guide privately owned airlines, privately owned airports and commercialised airports towards national policy goals.     

Airport–airline vertical relationships,their effects and regulatory policy implications

This paper examines the forms and effects of vertical relationships between airports and airlines with a focus on the North American and European aviation markets. We find that such vertical relationships enables those participating to achieve various benefits and may be formed as a competitive response to other competing airport–airline alliances. In some cases, vertical airport–airline relationships strengthen the hub status of major airports, leading to increased employment and service quality in local markets. On the other hand, preferential treatment of a particular airline by an airport may enhance that airline’s market power, allowing it to dominate the airport and charge hub premiums. The competition and welfare implications of airport–airline vertical alliances can be complicated and two-sided, subject to the influences of other factors such as the market structures of the airline and airport markets.     

Government support to airlines in the aftermath of the COVID-19 pandemic

This paper assesses government support measures to the air transport sector following the outbreak of the coronavirus disease (COVID-19) pandemic from two points of view. First, it explores the factors that shape governments’ willingness to support airlines. This is followed by a discussion on the various types of support that may be provided and how country-specific parameters influence the choice of measures. Second, it analyses the implications of government support in three dimensions relevant to air transport policy: competition and liberalisation, airline ownership and control, and environmental sustainability. The analysis suggests that most governments give a high priority to maintaining air transport connectivity in order to protect economic activity and jobs, in aviation itself and in related sectors such as tourism. The trade-off between ensuring connectivity and maintaining competition after the COVID-19 pandemic is a challenge with several political and economic dimensions. The re-orientation of public policy in the aftermath of the pandemic may limit the relative importance of the policy priorities that shaped the evolution of the air transport sector before the crisis, especially those related to climate change and the environment. The role of government and public authorities at all levels – especially the type and duration of measures affecting transport operations – will be crucial for the future development of the aviation industry.     

Low-cost airlines,secondary airports,and state aid: An economic assessment of the Ryanair–Charleroi Airport agreement

This paper builds a vertical differentiation model to analyse the effects of subsidies, or lower aeronautical charges, for secondary airports on competition between low cost and full scheduled carriers. The Ryanair–Charleroi Airport agreement in Europe is used as an example and as a basis for the model. The main findings are that subsidization or lower airport charges benefit consumers and negatively affect incumbent airlines. However, they may be more affected by competition than by the subsidy. An empirical analysis provides a few insights on the influence of dominating airports in Ryanair fares. We conclude that this airline sets lower fares when flights depart from or arrive at dominated airports.     

From hub to tourist destination – An explorative study of Singapore and Dubai's aviation-based transformation

The growth of air transport networks and deregulation have allowed small, low-populated places like Singapore and Dubai to become major international tourism destinations. Both have used tightly combined airline, airport and tourism strategies to help achieve this. Here we analyse developments in Singapore and Dubai by examining interactions between their airlines, airports, governments and tourism authorities, and how integrated management strategies leveraged their aviation traffic hubs to develop tourism destinations.     

What hurts the dominant airlines at hub airports?

This paper estimates a frequency equation to explain the determinants of network airline service levels at their hub airports. Drawing on European data for 2002–2013, we find that network airlines reduce frequencies when the share of low-cost airlines increases both on the route and at the hub airport. On the contrary, frequency choices of network airlines are not affected by competition from low-cost airlines operating in nearby secondary airports. We also find some evidence that mergers in Europe may result in a re-organization of the route structure in favor of the hubs of the larger airline.     

Impacts of the Air France–KLM merger for airlines,airports and air transport users

Excess capacity and low returns have led to consolidation and mergers in the airline market. The joining of KLM and Air France within the SkyTeam alliance has been the most dramatic of these events. This paper looks at the probable effects of the merger on the various players that are immediately affected; airports, airlines and travelers. It does this using the AIR Transport Network COmpetition Model. The analysis finds, in particular, that fears that Schiphol may lose out as a result of the merger may be exaggerated, especially when high-speed rail is added to the mix of modes considered.     

Peripheral market entry,product differentiation,supplier rents and sustainability in the deregulated European aviation market – a case study

Ryanair, in its net margin and passenger numbers compared with its national airline, is the most successful new airline in Europe. The history of the airline is examined briefly and the Ryanair product is analysed. The airline has developed a very low fare product with high staff productivity. It has also tackled costs to airlines of services such as airports, handling, reservations and ticket retailing. Ireland’s island location was an attractive base for a low cost airline and rapid traffic growth has resulted from Ryanair’s entry to the market. The paper examines the sustainability of the low fare Ryanair product in respect of passenger preference, labour markets, and external costs such as airports and reservations. The optimum regulatory environment for the successful operation of low cost airlines is examined in the light of the Ryanair experience.     

Managing New Zealand's airports in the face of commercial challenges

This paper explores commercial issues surrounding managing airports in New Zealand. Airport managers face pressures from changing airport–airline relationships, low cost airlines, proposed new airports and the growing importance of non-aeronautical revenues in achieving commercial goals. New Zealand's airports have moved from an operating environment within which all the principal airports were owned and managed by central government to one where airports are run as commercial entities under a variety of ownership structures. New Zealand has a high dependence on air transport and for its size, a very developed regional airport network.     

European Union-Latin America/Caribbean air transport connectivity and competitiveness in different air policy contexts

This paper discusses the factors that affect network connectivity and competitiveness in the European Union and Latin America/Caribbean air transport market. The methodology is based on detailed real origin and destination data that allow the calculation of levels of market concentration and segmentation, airport connectivity and network efficiency. The bilateral markets analyzed compare unfavourably with other inter-continental markets, even though the economic growth of the countries involved would suggest otherwise. The market is dominated by a small number of airports and airlines, and connectivity in several Latin American and Caribbean states is over-dependent on tourism. Geographic factors can partially explain the situation identified, while the impact of policy, especially as regards the fragmented moves towards liberalisation, is also discussed.