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Briefings

Cheap air travel and the EU

in | by Luke Lythgoe

Mass air travel and cheap air fares are among the most tangible benefits the EU has brought European consumers since the 1980s. Some aviation industry executives have warned that Brexit could threaten some of these gains.

The background: Liberalisation leads to low-cost air travel

The big breakthrough came in 1992, when a single market for aviation was created across the EU. Until this point the industry was dominated by national flag carriers and state-owned airports. Some airlines held monopolies on specific routes, and prices were set directly between carriers in a cartel managed by IATA.

The new single market allowed any EU airline to operate services from, and between, any member of the European Community – an arrangement soon extended to Norway, Iceland and Switzerland. New airlines emerged, challenging the monopolies of the traditional flag-carriers and kickstarting an era of fierce competition which forced down air fares and opened up affordable holidays abroad to millions.

In 2006 the EU invited western Balkan states to join in with the launch of a European Common Aviation Area (ECAA). Bilateral aviation agreements granting reciprocal route access in return for compliance with EU safety, environmental and other rules were signed with ‘ECAA Partners’,  including Morocco, Jordan and Israel. More ECAA partner agreements are under negotiation.

However, liberalisation of the aviation market is by no means complete, with other aspects of the industry still monopolised by governments or private companies. With the UK historically championing competition in aviation, progress is more likely if we stay in the EU.

Can Britain be kicked out?

If, after Brexit, the UK negotiated continued access to the Single Market like Norway or Switzerland, aviation would remain much the same.

Even If the UK opted out of the Single Market, many experts believe the prominence of UK-owned airlines – BA parent IAG and EasyJet among them – and the importance of Heathrow as a major European hub will make continued membership of ECAA highly likely.

So, in either scenario, Britain would likely retain a link with the ECAA. This would probably involve a bilateral ECAA agreement, which could be put into effect quickly – for one, all the standards ECAA partners must adhere to are already in place in the UK.  

But under a standard bilateral agreement access would be restricted – UK airlines would be able to fly freely between UK and EU airports but could no longer fly between two destinations in continental Europe. This would be felt most acutely by EasyJet, one of the UK’s most successful budget carriers with hubs in several EU countries. The obvious way round this would be to set up a separate EU-based firm, but this would require a structural overhaul and could impact jobs.

Conversely, EU airlines like Ireland’s Ryanair would be prevented from flying internal UK routes. Reduced competition could lead to higher airfares in the UK and in the rest of the EU alike.

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    Reasons for the EU to keep the status quo

    The British government has been at the forefront of Europe’s liberalisation drive, and British airlines top European growth rankings. BA and EasyJet are the third and sixth largest EU carriers and market liberalisation has allowed both to become trans-European companies with hubs in several countries. Sidelining them would threaten jobs at home but also in many EU member states – in air travel, but also in air cargo and in tourism.

    Aviation integration policies planned by Brussels would also suffer a setback if the UK exited.

    Reasons to kick the UK out

    But while the UK may be the largest player in European aviation today, major competitors in the EU like Air France-KLM and Lufthansa, or EU budget airlines like Ryanair or Wizz could be tempted to lobby their governments to restrict the UK’s access – benefiting from British airlines’ removal from the market.

    Aviation: A positive argument against Brexit

    EU policies have opened up European air routes to competition, tried to make airport landing slot allocation fairer for new airlines, and even opened up the market in baggage handling at larger airports. All of this has brought down fares.

    But other aspects are yet to be liberalised. The EU is working to unify national air traffic control systems, which would reduce delays, shorten routes and save fuel and costs for the passenger. Frequent flyer programmes and congestion at airports – many still run as 1980s-style monopolies – are also on the EU Commission’s reform agenda.
    It may be unclear if Brexit will have an immediate impact on passenger airfares. But what is clear is that it will mute Britain’s influential voice in Europe-wide aviation policy-making.

    Edited by Geert Linnebank