So far liberalisation has produced only a small increase in the level of competition on European air routes, and fares have generally risen, says a new report by the UK Civil Aviation Authority.
Two and a half years after Brussels deregulated the European Union's aviation market only 7 per cent of routes between member states are served by more than two airlines, and 87 per cent of domestic routes are still monopolies. While both figures have improved slightly, suggesting more competition, the rise is 'far from dramatic'.
However, competition is tougher on the high-frequency, busier routes. Only 64 per cent of domestic flights are on monopoly routes - down from 74 per cent in December 1992 - and 25 per cent of intra-EU state flights operate on routes with three or more competitors (up from 19 per cent in 1992). The domestic markets in Germany, Spain and France are singled out as demonstrating 'some striking advances in competition.'
Generally, airlines have introduced new types of fares rather than changing the level of fares, and any downward pressure has usually been caused by a new entrant. Examples include British Midland, Maersk, Ryanair, EuroBelgian (EBA), British Airways (including Deutsche BA and TAT), Air Liberté, Euralair and Spanair. However, some carriers such as AOM, Portugalia and Meridiana have competed on service quality rather than price.
The CAA's list of monopoly or duopoly routes which it thinks could support more competition includes:
* Thirteen routes from London/Heathrow on which a 25 per cent market share could produce a viable customer base: Barcelona, Copenhagen, Düsseldorf, Geneva, Lisbon, Madrid, Milan, Munich, Oslo, Rome, Stockholm, Vienna and Zürich. British Midland already plans to enter Heathrow-Zürich (see page 18).
* Fifteen non-London routes on which a new entrant might expect to fill 65 seats per flight at a reasonable frequency. These are from Paris to Amsterdam, Athens, Barcelona and Milan; from Rome to Amsterdam, Athens and Madrid; from Madrid to Amsterdam, Frankfurt and Milan; from Frankfurt to Amsterdam, Athens and Vienna; and from Copenhagen to Stockholm and Oslo.
* Thirty-five domestic routes with some potential, the most significant being from Frank- furt to Berlin and Hamburg; from Munich to Hamburg and Cologne; and from Paris to Montpellier and Strasbourg.
The CAA identifies three main strategies for new entrants. The British Midland approach offers similar frequencies and service to the incumbents, possibly with lower fares. Ryanair gives high frequencies and lower fares, but with lower service standards. And EBA's no-frills, lower frequency flights offer extremely low fares.
Richard Whitaker
Source: Airline Business
