Sean D. Barrett

Airport competition in the deregulated European aviation market

Airport competition is a new feature of European aviation under deregulation. Seventeen case studies of airport competition are presented. Newly commercialised and privatised airports are found to be attractive to passengers and low-cost airlines to whom they offer large discounts. There is considerable scope for much increased service at Europes many underused airports. The results in the case studies show spectacular increases in traffic at lesser-used airports when served by a low-cost airline.

THE IMPLICATIONS OF THE IRELAND-UK AIRLINE DEREGULATION FOR AN EU INTERNAL MARKET

The deregulation of air transport between Britain and Ireland in 1986 brought reductions in fares of over 50% and a doubling of passenger numbers in contrast to high fare increases and market stagnation before deregulation. The factors which contributed to the greater success of this deregulation than on US internal routes or Anglo-Dutch routes included market stagnation before deregulation, weak competition from sea carriers, the lack of charter airlines, the large ethnic Irish population in Britain, a change in fashion away from sun tourist destinations, market exit by British Airways and the availability of low cost labour to the main new market entrant due to high unemployment in Ireland. The development of Stansted as an alternative to the slot-constrained Heathrow airport was critical. The implications of this successful deregulation for the EU deregulation in April 1997 depend on the strength of these factors in other markets and the deployment of pro-contestable policies on slot allocation, state aids and predation.

PERIPHERAL MARKET ENTRY, PRODUCT DIFFERENTIATION, SUPPLIER RENTS AND SUSTAINABILITY IN THE DEREGULATED EUROPEAN AVIATION MARKET - A CASE STUDY

Ryanair, in its net margin and passenger numbers compared with its national airline, is the most successful new airline in Europe. The history of the airline is examined briefly and the Ryanair product is analysed. The airline has developed a very low fare product with high staff productivity. It has also tackled costs to airlines of services such as airports, handling, reservations and ticket retailing. Ireland’s island location was an attractive base for a low cost airline and rapid traffic growth has resulted from Ryanair’s entry to the market. The paper examines the sustainability of the low fare Ryanair product in respect of passenger preference, labour markets, and external costs such as airports and reservations. The optimum regulatory environment for the successful operation of low cost airlines is examined in the light of the Ryanair experience.

Deregulating European aviation -- A case study

European international scheduled aviation has been characterised by bans on market entry, price collusion, and capacity sharing. High fares were charged compared to world standards and the fares charged by European charter airlines.In May 1986 new entrants with pricing freedom were permitted on the London-Dublin route which was then the third largest in European scheduled international aviation. Prior to deregulation the route experienced high fare growth. The unrestricted fare ex-London increased 72.6 per cent compared to a Retail Price Index increase of 41.5 per cent. There was a growth in passenger numbers in the years 1980–85 of 2.8 per cent.Since deregulation passenger numbers have risen to 2.3 million compared to 994,000 before deregulation. Fares have declined by an estimated 37 per cent ex-Dublin and 42 per cent ex-London in real terms. There have been four cases of market entry and one of market exit. The estimated share of the new entrants in the second half of 1989 was 28 per cent. The preregulation earnings data of Aer Lingus, the market leader, indicated that protection allowed staff to earn economic rents. A two-tier structure was introduced in response to competition.Remaining barriers to contestability in UK/Ireland aviation include hub airport dominance, ground handling monopolies, and the ability of airlines with routes in both regulated and deregulated markets to engage in geographical price discrimination against airlines with routes in deregulated markets only. A pro-contestability aviation policy in Europe will require measures to prevent the abuse of dominant positions by established airlines over new market entrants and to prevent collusion between established airlines.

The Sustained Impacts of Taxi Deregulation

The Irish High Court decision in 2000 to deregulate entry to the taxi sector brought a large increase in taxi numbers and reduced waiting times for customers. These developments were sustained through to 2008 with increased output and reduced waiting times. In view of these lasting successes, arguments that taxi deregulation is unwise and unsustainable are examined.

Barriers to contestability in the deregulated European aviation market

The deregulation of aviation in the United States and intercity bus transport in the United Kingdom initially resulted in substantial fare reductions associated with new market entry. Many new market entrants subsequently left the market and fares increased. International aviation in Europe has been operated by national airlines with price collusion and capacity sharing and a ban on new entrants. The normal economy fares charged on air services within Europe are the highest in the world. Therefore, there is significant scope for fare reductions when the European Community (EC) internal market comes into operation in 1993. Deregulation of market access will, however, leave unaddressed other barriers to contestability in the deregulated European aviation market. The structural barriers to contestability include hub airport dominance by the incumbent airlines, ground handling monopolies, and computer reservation system (CRS) bias. The paper proposes measures to ensure access to major airports for new entrant airlines on equal terms with incumbent airlines and the deregulation of the market for airport ground handling. The EC code of conduct for the neutral operation of CRS for incumbent and new entrant carriers is an important precedent. The strategic obstacles to contestability in a deregulated European airline industry are anticompetitive mergers and predatory pricing. In recent years national airlines have acquired several independent airlines in important European markets. It is recommended that such takeovers be prohibited because of their anticompetitive implications in the absence of competition between national airlines. The large networks of national airlines allow them to pursue policies of geographical price discrimination with reduced fares on contested routes and higher fares on uncontested routes. Price surveillance is recommended to explain fare differences between contested and uncontested routes. It is recommended that the EC competition policy exemption for price consultations between airlines be ended. Without measures to tackle the structural and strategic obstacles to competition in European aviation, its liberalization may have no impact on the present high-cost system.

MARKET ENTRY TO THE FULL-SERVICE AIRLINE MARKET - A CASE STUDY FROM THE DEREGULATED EUROPEAN AVIATION SECTOR

In 1994 Cityjet, a full service airline, entered the Dublin-London route, the busiest international route in Europe. The airline encountered both commercial and regulatory obstacles. It was unable to attract a sufficient number of full fare passengers from the incumbent airlines and incurred high airport and aircraft costs in addition to high retailing costs. Cityjet in early 2000 was acquired by Air France and now operates as a low cost, full service division competing for the market within the Air France group. The paper contrasts the impact of post-deregulation barriers to contestability on Cityjet and Ryanair.

The EU/IMF Rescue Programme for Ireland: 2010–13

The EU/IMF €85 billion rescue of the Irish economy required Ireland to address critical problems in banking and bank regulation, the public finances and structural reform. Ireland must also address weak expertise in economics in the public sector and in banking, rent‐seeking, regulatory capture, moral hazard, lack of accountability and failures of corporate governance.

Exporting Deregulation - Alfred Kahn and the Celtic Tiger

Airline deregulation in Ireland arose from a parliamentary revolt in 1984 against legislation to imprison and fine those selling airline tickets below government approved fares. The revolt was heavily influenced by US airline deregulation in 1978 and the writings of Alfred Kahn. The results were spectacular. Dublin-London, deregulated in 1986, became the busiest international route in Europe. The 2.2m passengers on the Irish national airline before deregulation in 1986 increased to 72m passengers on four Irish airlines in 2008. Ryanair redefined the European aviation. The success of airline deregulation had a major influence on Irish economic policy.

Mortgage Credit (Loans and Bonds) Bill 2012

The Danish mortgage banking model was created in 1797 with the Kreditkassen following the 1795 Great Fire in Copenhagen which destroyed a large proportion of the city and left many homeless and created an instant and wide-ranging demand for housing. In order to meet this demand a pooling system was designed to obtain the necessary level of capital at a reasonable rate. Though bubbles were not entirely prevented throughout the history of the Danish system it is extremely robust and has acted as a moderating influence on the housing market in Denmark. The aim of this process is to provide capital to allow the housing and banking markets to mend. The Irish banking sector continues to mend its balance-sheets. That places a priority on banks having large capital backstops and limiting lending to the wider economy. The continued concerns about existing mortgage arrears and the recession-reduced household disposable incomes available to serve mortgages that are currently being serviced weighs heavily on the banks with respect to their lending decisions.