Europe: October 2006 Archives

"The intellectual battle is over - open skies is the way forward." So says Alex Plant, head of economic policy and international aviation at the Civil Aviation Authority (CAA). But he admits the battle is still being fought over restrictons on ownership and control that are the other elements to a totally liberalised industry.
Speaking at a briefing in London this week he outlined the the primary obstacles to achieving this freedom - concerns over safety, non-reciprocity and regulatory convergence. And in a bid to open up the debate he says: "We felt it time to seek an objective view of the various issues."
In a discussion paper Ownership and control liberalisation the CAA points out the lack of commercial freedom in international aviation compared with other comparable global industries such as financial services and even highly sensitive sectors such as utilities and defence, and asks: "Why should airlines be so special when it comes to ownership and control?"
The CAA believes that there are likely to be substantial benefits from liberalisation and sets out a pathway for reform, which, it says, "should lead to safer, more efficient and cheaper international aviation".
It believes that liberalisation of ownership and control would bring benefits for safety and also for all participants in the industry - the airlines, their staff and the people who fly with them.
With regard to safety, greater market opportunities would act as incentives for countries' safety authorities and their arlines to improve safety performance, the CAA believes, while reform would facilitiate cross-border investment, lower financing costs and attract innovative management. Freer flows of capital would "allow a more financially stable industry structure to emerge and structural changes, such as consolidation and the growth of airlines with a significant presence in more than one continent, are made easier".
For consumers, lower prices and greater choice should result, while multinational airlines could offer new routes that are not possible at the moment. Airline staff have not been left out - the CAA believes they should have nothing to fear from reform. "A more flexible and responsive sector enabled by liberalisation should increase demand for the industry's outputs, with positive effects on employment," it insists.
With such a win-win situation envisaged one can only wonder why it is taking so long to achieve, and who is standing in the way?

As Ryanair's management works on its takeover bid for Aer Lingus, disgruntled Ryanair employees across Europe are campaigning hard to gain union recognition, which they say is being denied them by the Irish low-cost carrier.

This action has led to a strike in Spain by its baggage handlers, while in Italy staff are refusing to sell food, hot drinks and alcohol on board flights.

It seems clear that Ryanair's management will fight doggedly to keep unions out of the carrier for as long as possible, but it can only be a rearguard action.

Perhaps the time is overdue for its combustible boss Michael O'Leary to take a leaf out of mentor Herb Kelleher's book and build the family ethos made so famous at Herb's Southwest Airlines at his own carrier.

The problem is that Ryanair is now virtually institutionally confrontational - and that is something families find hard to change.

Martin George and Iain Burns of British Airways may be the first high profile heads to roll in the on-going probes into fuel surcharges, but are unlikely to be the last.

George and Burns, both high-flying and well-respected industry executives, have done the decent thing at BA. Although not admitting direct responsibility for "inappropriate" conversations relating to long-haul fuel surcharges, George is taking the rap with his resignation. Burns has yet to comment.

The departure of George after 4 months of gardening leave was probably inevitable. He needs to rebuild his career, most likely outside the aviation industry, and BA needs closure.

BA may stem the tide in people terms - it certainly will not want to lose any more top managers - but the investigation continues. The prognosis does not look too encouraging.

And let's not forget the cargo fuel surcharge probe, which also affects BA. This is an equally troubling investigation for airline boardrooms on both sides of the Atlantic. The fallout should become apparent over the next few weeks and months - it will not be a pretty sight.

In Europe the distraction of Ryanair's hostile bid for Aer Lingus has overshadowed the leaking of an important report into the perils faced by Italian flag carrier Alitalia.

The most remarkable thing is that the report is authored by the airline itself. In it, Alitalia chief executive Giancarlo Cimoli warned that his carrier cannot be profitable under its current cost structure. He also apparently criticises unfair competitive advantages enjoyed by low-cost carriers.

After over two years trying to wrestle with Alitalia's unions and government to produce an airline that can survive in today's cut throat European market, this sounds like Cimoli's last throw of the dice to gain the muscle to fundamentally change how the loss-making carrier runs. History tells us that such a prospect is extremely hard to achieve in Italy - is the bell tolling for the beginning of the end of this proud European airline?