Priorities
AEA’s Call for Action
A key pillar of Europe’s cohesion and international competitiveness
Aviation is a key pillar of Europe’s competitiveness. Airlines carry about 40% – by value – of the Europe’s exports and imports and transport 366m passengers per year in and out of Europe. They provide access to global markets for European business, secure 4.2 million jobs in Europe, and promote tourism across the globe, whilst AEA member airlines alone employ 400,000 people.
The enlargement of the European Union could not have happened without aviation. Of the ten countries which acceded in 2004, two are island States, the others are on average 19 hours’ surface-travel time from Brussels. The two more recent additions are a day’s drive from the political institutions, and 32 hours by train. What is true of links to the centre is even more true of links within and between the regions.
Transport guarantees that goods and services are available at our fingertips. Not only are Europe’s major centres connected directly with all parts of the world, but through their hub airports that access is extended to virtually every city in Europe. This is what network airlines do, they do it extraordinarily efficiently, and since their networks compete with each other they offer the customer a choice, keeping prices low and service quality high.
The effect of the global crisis on aviation
Within the airline sector, some of the statistics are not just alarming, they are truly staggering. In the first seven months of 2009, AEA members’ freight traffic was 21.3% lower than in 2008. During the same period, they carried 17 million fewer passengers. Most alarming of all, the price paid by the remaining passengers, per kilometre, fell by 14%.
The impact on the airlines’ bottom line is also unprecedented in its magnitude. AEA airlines’ aggregate result for 2009 is expected to be a loss of € 2.9 billion, which would be 50% greater than the largest deficit on record, dating from 2001.
AEA does not anticipate a return to profitability in 2010 and there are grounds to fear a further worsening of business conditions before a sustained recovery is established. By then, the international aviation landscape will have changed: airlines that do not create economies of scale and scope, or cost advantages over their competitors, or those who have established themselves as operators specialised on niche markets, will not be able to survive.
Consolidation hand-in-hand with market-friendly European regulation
In recent years, in the USA, Europe and elsewhere, airline market activity has been substantially liberalised. Ease of market access has generated competition and huge efficiencies have been realised, with the benefits flowing directly to the consumer.
The liberalisation process, however, is far from complete. International aviation still functions on an essentially bilateral basis of agreements between pairs of countries as to who may fly which routes, and very often at what prices. A feature of these agreements is inevitably the ‘nationality’ of the airlines involved. Such a system places heavy constraints on industry rationalisation. Cross-border investment opportunities remain severely restricted.
Liberalisation is also incomplete in another sense. While European airlines are essentially market-driven, many of their suppliers and service providers are not. This has become increasingly evident as the freedom to operate commercially and the need to eliminate inefficiency has driven down the airlines’ internal costs, to the extent that external costs over which the airlines have little or no control now represent 64% of total expenses.
Thus, during the current economic crisis, airports have sought to compensate for loss of business volume by raising the charges they impose on their airline customers. In the case of air navigation services, a statutory cost-recovery pricing regime automatically adjusts prices upwards in the case of volume decreases. Security charges, too, have continued to rise.
These high costs and regulatory restrictions must be addressed if aviation is to continue to promote the recovery and sustainable competitiveness of European economies. .