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EU Economic Governance and Globalization

Edited by Miriam L. Campanella and Sylvester Eijffinger

It is through a gradual evolution, rather than by grand design, that the somewhat fragmented economic policies of the EU now appear to be heading towards a rather more robust and coherent economic governance. EU Economic Governance and Globalization considers the following crucial question as the EU enters its final stage of institution-building; will the economic institutions of the EU push ahead to reform its rigid national economies and open them up to globalization and international competition?
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Chapter 3: Competition versus competitiveness in the European single aviation market

Martin Staniland


Martin Staniland INTRODUCTION In September 2001, a remarkable event occurred in the world of European air transport. The market value of British Airways (BA), the largest airline in the EU, fell to the point that it was lower than that of the Irish low-fare airline Ryanair (Cowell, 2001).1 While this event mainly reflected the dramatic collapse of airline share prices following the terrorist attacks of 11 September 2001, it also symbolized the challenge that new entrants are offering to the established European ‘flag carriers’ such as BA, Air France and Lufthansa. Less obviously, it reflected the importance of intercontinental routes for the flag carriers, shown particularly in their sensitivity to any reduction in traffic across the North Atlantic. This chapter discusses the effects of the establishment of the single market on the European airline industry. In particular, it examines the dilemmas that have faced both managers and regulators as a result of the simultaneous advent of globalization and of liberalization closer to home. These dilemmas are complicated by the need for European airlines to respond to a radically new regulatory environment within Europe while complying with a wider, international regulatory regime still governing routes that are crucial for their revenue and for such profits as they earn. Understanding these dilemmas and the strategies adopted to cope with them provides a salutary lesson in the folly of trying to analyse commercial responses to the single market without taking account of the stakes that many...

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