As Europe and the USA work towards an open aviation area across the North Atlantic, labour politics looms as a major hurdle. So would liberalisation really have to be at the expense of labour? A new study from the UK Civil Aviation Authority, a long-standing advocate of deregulation, concludes that it would not. In this executive summary, the CAA's head of international policy Alex Plant outlines the findings.

Concerns about the possible impact on labour of the liberalisation of air services have been a major feature of the debate about whether an Open Aviation Area between the European Union and the USA should be introduced. In a new study, The Effect of Liberalisation on Aviation Employment, the UK CAA considers the validity of those concerns and examines the evidence of the impact on UK labour of the liberalisation of European aviation markets. The main conclusions are:

The evidence from the UK experience is that liberalisation has facilitated the growth of the aviation market and boosted employment in the sector. Many more people are now directly employed in airlines, airports and in the ancillary industries that support aviation than before. A similar picture emerges when examining the US domestic industry following deregulation. The structure of the passenger airline business acts as a natural constraint on the ability to shift jobs overseas. Whereas a manufacturer can shift its centre of operations from one part of the world to another, a passenger airline must be near its market with geographic "centres of gravity" at either end of the routes that it serves and needs to employ people in those locations to maintain operational efficiency. Pilots, in particular, are a skilled and scarce resource. Indeed, the sheer scale of the markets in the USA and the European Union (EU) in comparison to the rest of the world means that the labour supply for skilled jobs in aviation is concentrated in those countries. There are not large numbers of suitably qualified pilots elsewhere that would readily be able to take over jobs. The phenomenon of "flags of convenience", which has been seen in other industries and led to a loss of jobs from a particular country (such as happened in the US maritime sector), is unlikely to occur in aviation. This is in part because the international regulatory system in aviation reduces the possibility of regulatory cost savings, particularly when comparing the similarly tough regimes in place in the EU and the USA. It is also, in part, because the need for skilled labour makes it harder to replace higher-cost employees from developed nations with lower-cost employees from other parts of the world.

Neither are the perceived threats to labour borne out by experience of liberalisation. The review of the UK's experience in relation to liberalisation within Europe has not provided evidence of any of the following:

airlines re-flagging themselves to exploit lax regulatory regimes; UK workers being displaced by cheaper workers from other countries in the EU, or; UK airlines losing market share to airlines from lower-wage EU countries.

Liberalisation should not be seen as a threat to labour - in fact it should help to create benefits for employees. In times of financial distress for companies, nationality-based restrictions on ownership and control of companies could in fact be a hindrance to their remaining in business. Consequently, the removal of such restrictions is likely to improve the chances of such companies staying afloat and continuing to provide local jobs.

Also, where restrictions on output are removed - as would be the case under an Open Aviation Area - then, as well as driving up competition and efficiency, liberalisation is, at the same time, likely to facilitate market growth, creating a larger "cake" to be shared out between the various players.

More players in a market increases choice of employers for airline staff, and, when combined with greater demand, can create a situation favourable to labour.

It is also important to remember that market access restrictions are not the only protection for labour interests. Specific employment legislation on both sides of the Atlantic would still apply, providing safeguards for employees and acting as another constraint on the extent to which a free flow of labour could emerge even within a liberalised environment.

Moreover, the situation within the US domestic market reduces the impact of liberalisation on the US industry. The strength and competitiveness of the US domestic market, which accounts for around 75% of revenues for US airlines, means that the impact of increased competition on international routes for a US carrier in terms of its overall market is likely to be far less, and that the overall effect of new entrant competition will be tempered.

The paper finds that the fears expressed by some unions about liberalisation of the EU-US aviation market resulting in jobs being lost would seem to be overstated. These concerns need not therefore stand in the way of reforms that would sweep away much of the outdated regulatory structure that has existed in aviation since 1944.

An Open Aviation Area would put EU-US aviation on to the same footing as most other industries, would boost competition, innovation and efficiency and bring benefits to consumers, shareholders and employees alike.

As the concept is developed in more detail it will be important that employees and their representatives are fully involved and can bring their knowledge to bear to help in creating a framework designed to further a truly liberalising agreement.

Alex Plant heads the CAA's International Aviation Policy.

Airline employment by country 1992-2001

Country

1992

2001

change

UK

70,838

98,649

39%

France

60,583

69,235

14%

Germany

58,168

51,979

-11%

Spain

30,594

34,492

13%

Scandinavia

28,733

31,173

8%

Netherlands

28,364

31,459

11%

Italy

23,790

25,219

6%

Switzerland

22,813

14,535

-36%

Portugal

12,019

9,809

-18%

Belgium

11,043

1,542

-86%

Greece

10,861

5,625

-48%

Finland

8,053

9,240

15%

Austria

5,566

7,536

35%

Ireland

5,453

6,323

16%

All Europe

380,199

402,775

6%

NOTE: Total employment by airlines by country of registration.

Source: Airline Business

Topics