Towards an Efficient European Air Transport System.pdf

Towards an Efficient European
Air Transport System
November 2002
Association of European Airlines
Towards an Efficient European Air Transport System







A study for the
Association of European Airlines


h Button
With
Kingsley Haynes and Roger Stough


School of Public Policy
e Mason University







November, 2002
CONTENTS


Key Points i
Executive Summary ii

1. Introduction 1
2. Do We Need Air Transport? 4
3. What are the Trends in EU Air Transport? 11
4. Is the Market Segmenting? 24
5. Is the Current Structure Sustainable? 31
6. Answering Some Key Questions 42
Annex I European Union Air Transport Policy 44
Annex II Airline Deregulation Elsewhere 52

References 56
Glossary of Terms 59
Key Points


Air transport is important
• Air transport is a major European industry in its own right
• Air transport is a lubricant for European economic growth and for political integration
• Air transport generates local economic benefits
• Air transport is central to some key industries such as tourism and high-technology sectors

The changes in European Union policy have had profound effects on European airlines
7. The airline market is now petitive
8. Real costs of air travel have been falling
9. In general air travelers have benefited in the short term from the ‘Three Packages’
10. There has been market in-roads by no-frill carriers

Not all elements in the air service value chain petitive
• There is market power in many industries providing inputs to airlines
• Other elements in the value chain are more than covering their full costs
• The e is that the overall size of the market for air transport is not optimal

Over the long term the scheduled carriers are not recovering their full costs
• The scheduled airlines encounter severe cyclical fluctuations in their markets
• The nature of the ‘airline product’ forces fares