George Williams

A comparative analysis of the application and use of public service obligations in air transport within the EU

The paper seeks to compare and contrast how different European Economic Area member states have adopted and made use of the public service obligation (PSO) mechanism in air transport. Analysis shows that there is considerable variation in the extent and way in which various countries have adopted the PSO mechanism. Some countries, such as France, the Irish Republic and Norway, have made extensive use of PSOs on their domestic scheduled air services networks. This is in contrast to the approach adopted in the United Kingdom, where a number of lifeline air services are vulnerable to potentially adverse airline pricing and output decisions. This suggests that there are major inconsistencies in the approach and commitment to social air services provision across the European Union which may undermine broader policy initiatives designed to enhance mobility and accessibility.

WILL EUROPE'S CHARTER CARRIERS BE REPLACED BY "NO-FRILLS" SCHEDULED AIRLINES?

Europes charter airlines traditionally have carried their passengers at significantly lower unit costs than their scheduled counterparts. The emergence of “no-frills†scheduled carriers with their focus on low costs has produced major challenges not only to full service providers but also to the charter operators. A comparison of charter and “no-frills†airlines’ operating costs indicates that while the differential has been significantly reduced, the advantage still lies with the former. The greater flexibility offered to the traveller by the latter though has seen the demise of many short haul charter services. Increasing numbers of travellers are opting to put together their own holiday packages using the Internet. Charter airlines need to respond to this threat to their short haul markets by offering greater flexibility to their customers.

DRIVERS OF LONG-HAUL AIR TRANSPORT ROUTE DEVELOPMENT.

Abstract An analysis of long-haul routes identifies trends and patterns underlying their development. Five distinct perspectives: geography, regulation, manufacturers, passengers and airlines are taken to investigate the drivers of long-haul route development. From the insights gained it is inferred that the demand for long-haul aircraft is a complex function thereof, whereby long-haul routes are operated between cities with strong business and social connections as influenced by the dynamics of change and underlying geography.

Changing the rules—amending the nationality clauses in air services agreements

Airlines are not able to conduct their business in the same way as other global transnational industries. They are inhibited by the foreign ownership restrictions in Air Services Agreements and national laws. This paper reviews the background of nationality clauses and the current regulations in the EU, US and Asia-Pacific. It analyses the pros and cons of ownership rules, the benefits and risks of foreign investment, and the motives for foreign investment in the EU and Asia-Pacific. It also assesses the prospects for change in ownership rules under multilateral and plurilateral proposals.

European major airlines' strategic reactions to the Third Package

Since the Third Package in 1993, European Union (EU) registered airlines have been able to purchase majority ownership of other EU carriers and set up airlines in other EU countries. This paper investigates how European majors have responded to the liberalised policy, especially European Commission Regulation 2407/92. It goes on to analyse the impact of these strategies for airlines and the EU-US relationship in terms of airline alliances. It concludes that British Airways and the SAirGroup have pursued a policy of acquiring airlines in EU countries, with the former finding it an expensive and questionable strategy, and the latter disastrous.

European Experience with Direct Subsidization of Air Services

Major differences in the application of the public service obligation (PSO) mechanism in air transport across EU member states give rise to questions as to its misuse. Variations in the levels of subsidy awarded per passenger are due in part to the large differences in the maximum fares that carriers can charge. This article explains why the current European PSO legislation needs to be amended; ideally, the whole system requires proper enforcement at Commission level. While the latter is unlikely, the author shows how the PSO mechanism could be amended to prevent its misuse, reduce subsidy levels and encourage innovation.

An Ongoing Process—A Review of the Open Skies Agreements between the European Union and the United States

Abstract This article seeks to clarify the implications of the Open Skies agreement reached between the European Union (EU) and the USA in March 2007. It begins by reviewing the background of aviation regulation and the negotiations that have taken place between the European Commission (EC) and the USA over the past few years. It discusses the EU and US perspectives on the development of the transatlantic market and summarizes the key elements of the new Open Skies agreement. It goes on to analyse the probable effects of the agreement and identifies the likely winners and losers. It also highlights the unresolved problems for the EU and the USA. Finally, it concludes that while both sides might not be satisfied with the new agreement, it will nonetheless become a liberalized model for other regions of the world to emulate.