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Industries in Europe

Competition, Trends and Policy Issues

Edited by Peter Johnson

This important book, a successor volume to European Industries, brings together a number of in-depth and authoritative studies of key European industries, providing fascinating insights into their nature and characteristics.
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Chapter 10: Air transport

Peter Johnson


Peter Johnson INTRODUCTION Up to the mid 1980s the air transport industry in Europe was characterised by a high degree of government intervention and control. All of Europe’s major airlines were owned by the state. National regulatory bodies had the responsibility for vetting proposed fare changes and for controlling capacity and entry. They also had responsibility for assessing the financial fitness of existing or would-be airlines. Air services between countries in Europe were the subject of bilateral agreements on pricing and capacity between the governments involved. Revenue sharing and the dominance of routes by state-owned ‘flag’ carriers were the typical pattern. This framework of regulation reflected the long-established perception, not just in Europe but throughout the world, that traffic rights were valuable national assets to be traded for reciprocal traffic rights or even rights in other areas. Such a perception was enshrined in the 1944 Chicago Convention (Balfour 1990), which recognised each signatory’s complete and exclusive sovereignty over its airspace. In Europe itself, air transport was given special treatment under the Treaty of Rome: it was specifically excluded from the general provisions of transport policy, and until 1986 there was even some doubt about whether the Treaty’s competition provisions, particularly Article 85 – which dealt with agreements or practices between firms which affected intra Community trade – applied to the industry. Since the mid 1980s, the regulatory environment in Europe has changed out of all recognition. The move towards deregulation started with some countries adopting a more...

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