Edited by Miriam L. Campanella and Sylvester Eijffinger
Chapter 3: Competition versus competitiveness in the European single aviation market
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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