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Europe’s Aviation Challenge
Will European Aviation remain a force to be
reckoned with?
Steve Ridgway
Chief Executive
26th November 2008
We’re heading into a new world …
Europe is at the centre of the global economy
For aviation to play this role …
• What do we need to fix?
• What do we need to protect against?
Aviation – a triumph of the European Union
• Powerful flag carriers – LH/AF/BA
• Successful low cost carriers – EZ/Ryanair
• Niche carriers – VS/Finnair
EU consumer has benefited
Against most measures, EU deregulation has
been a success
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Regulatory policy
Role of Regulator should be to facilitate :
• sustainable growth and success of industry by removing barriers and
reducing costs
Regulators’ role should be limited to:
• ensure safety and security
• enforce compliance with competition law
• deliver infrastructure
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Infrastructure
• Single European Sky
• New Airport Infrastructure
• Airport Regulation
Environment
• ETS – sound in principle but opponents
have turned it into a punitive tax
• National taxes
• UK
• Netherlands
• Ireland
Liberalisation
• Airlines need barriers to liberalisation
removed
• IATA Istanbul declaration makes this clear
• UK/Singapore Air Services Agreement a
perfect model
• Removed all barriers
• No limits on traffic rights or foreign ownership
• Yet governments and regulators still regard
aviation as a special case
• EU/US must deliver the EU mandate on OAA
Competition law and consolidation
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•
Removing barriers will speed up consolidation
Too many airlines today
Good and bad consolidation
Future is not 3 giant global airlines operating out of
different hubs
• If this happened:
– Competition would be weakened
– Consumers wouldn’t benefit as fares would increase with
less choice
– Only winner would be dominant monopoly airline at given
hub
LHR is larger than all other European hubs, and
BA already offers the most capacity to the US
Total Seat Capacity (k) to and from the US, April 2008 to Mar 2009
+52% +87%
+5%
+29%
Source: OAG, Virgin Analysis
Other global alliances barely challenge BA on
the overlap routes
Capacity Share on BA/AA Overlapping Routes from LHR, April 2008 to Mar 2009
5%
20%
4%
6%
8%
27%
24%
23%
23%
8%
24%
100%
80%
73%
64%
64%
47%
LHR- DFW
LHR- BOS
Onewor ld
Source: OAG, Virgin Analysis
LHR- MIA
VS
St ar
LHR- JFK
SkyTeam
LHR- ORD
Ot her
LHR- LAX
No Way BA/AA
• Nearly 50% of slots at Heathrow would belong to BA/AA/IB
• Heathrow is closed to new entrants
• Heathrow is unique –
– 26% of LHR-US passengers connect from other EU airports at LHR
– only 2% of LHR-US passengers travel via other European airports
• JFK has severe flight restrictions
• BA/AA trying to lock down both ends of LHR-JFK market and
dominate with hourly shuttle
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Open Skies
• First phase of EU/US Open Skies not brought promised benefits on routes out of
LHR
• Minimal new competition for BA because of a lack of capacity at LHR
• Regulators need to safeguard against anti-competitive proposals
• Must not suspend rules because of economic downturn
• Liberalisation should not be at any cost to consumers or competition
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Europe at a crossroads
• EU Regulators can abdicate EU leadership to other
regions
or
• EU Regulators could help to ensure EU airline industry is
at the centre of the global economy
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Deliver Single European Sky
Effective Regulation of Monopoly Service Providers
Provide sufficient infrastructure
Adopt Sensible Environment policy that incentivises behaviour
but doesn’t unduly penalise
‐ Remove bilateral/multilateral barriers
‐ Effectively enforce competition law to protect against anticompetitive alliances.
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