The end-of-term report on air-transport liberalisation, for the period 1993-6 from the European transport commissioner Neil Kinnock is full of praise for, and pride in, achievements and future plans. Liberalisation, it says, has worked well, with few major upsets, but, to be completed successfully, needs a little more effort in areas such as fares, capacity, infrastructure costs and market access. An end-of-term report for the same period on the Transport Commission itself would read a little differently: "-has promised much more than has delivered; could try harder" - or could it?
The broad achievements are indeed remarkable. More routes are being flown by more carriers and, on some routes at least, added competition has begun to drive down fares. What remains to be done is not so much remarkable as formidable, not least because it will almost certainly require the sort of regulatory intervention which, if done wrongly, could be the very antithesis of the liberalisation which Europe is pursuing.
Start with Europe's, notorious fares structure. It costs six times as much per kilometre to fly from Strasbourg to Vienna as it does to fly from London to Palma de Majorca, according to the report. The implication is that there needs to be EC action to bring such fares into line. Yet these are two highly disparate routes. One is a high-volume charter-dominated leisure route, the other a low-volume weekday-oriented business route: there is no free-market liberalising force which will pull those fares towards each other, far less towards the lower of the two.
To use legislation to force those fares from Strasbourg to Vienna downwards is to preserve regulation - a strange aim for a liberaliser. Those fares may well be high, but they are the ones, which the market will take, presumably because there is insufficient traffic to justify the entry of a low-price competitor to the single operator on that route. There is no apparent evidence that Luxair is an inordinately profitable carrier as a result of its dominance of this tiny market, nor that other carriers are queuing up to compete on the route. The only way in which fares could be lowered substantially (to say nothing of reducing them to one-sixth of their current levels) would be through applying subsidies on the social-need basis - not a very liberal concept.
The whole point of a liberalised air-transport market (or indeed of any other liberalised market) is that it is the market that sets the price. If there exists a niche sector for which somebody is prepared to offer a high-price service for which the customer will pay a premium rather than endure the suffering of road or rail travel, so be it. For the liberaliser to attempt to force that niche carrier to offer that niche service for a mass-market price is daft.
The liberaliser's role is surely to ensure that the operators in this market are there solely to satisfy market forces of supply and demand, and that they are free to do so. That means concentrating on eliminating subsidy, not encouraging it. It means trying to find ways of encouraging or enabling a fair and free market in access, not in forcing carriers into unprofitable access.
It means finding ways of increasing capacity - more often than not by forcing the removal of artificial restrictions on capacity. In a truly liberal market, there would not be dozens of national air-traffic management organisations trying to win an unrealistic share of revenues, but a couple of ATM organisations competing to provide the best, most cost-effective service across Europe, irrespective of national boundaries. That is probably not a politically realistic goal, but it is no less realistic than the aim of harmonising air fares through enforcement.
All of these aims are part of the Transport Commissioner's future aims, not in his catalogue of present achievements. He will only achieve his goal of a liberal, low-cost, free and fair market if he stops worrying about the absolute cost of fares, and starts worrying more about creating the environment in which a liberal market can achieve those low fare levels for itself.
Source: Flight International
