Lift the cap on foreign ownership and control of airlines to facilitate industry restructuring, panellists urged during a Routes Europe debate on the needs of the continent's air transport sector.

The wide-ranging discussion at the Strategy Summit which opened the event in Krakow on 24 April also highlighted uncertainty about the economic cycle and about the implications of the UK's Brexit referendum.

Association of European Airlines chief Athar Husain Khan argued that ownership and control restrictions were "not just a hindrance to struggling carriers, but just to the market becoming more mature".

He adds: "We're in archaic times when it comes to foreign ownership, foreign equity, joint venture, sharing etc. That needs to stop."

Another panellist, John Hanlon – secretary general of low-fares carrier association ELFAA – is equally emphatic. The restrictions are "irrelevant in a global market", he says.

A punchy take on the economic climate is offered by Bain & Company partner Geoffrey Weston: "For most airlines, this is as good as it gets." With yields coming down, he asserts, "it's just hard to see if you’ve got no more oomph left in your fuel hedging, where you're going to be making more profit”.

John Grant, director at JG Aviation Consultants, takes a warning from North America, "always a precursor" for Europe. Citing overcapacity, softening yields and dollar strength, he declares himself "extremely concerned that we are walking with rose-tinted sunglasses into a position that will catch people with their pants down".

Hanlon, however, takes issue with suggestion that there is overcapacity in North America: "I'm surprised they have used the collapse of the oil price to actually put in more capacity in the US."

Still, there seems to be a consensus on the need to prepare for any downturn.

"This is the right time for every airline to sort out their cost base and their structures," says Rafal Milczarski, chief executive of Polish flag carrier LOT.

"We're addressing ratio of non-flying personnel to flying personnel," he adds, at which panel chair Mark Pilling, Flightglobal's chief markets officer, interjects: "That's code for something, isn't it?" But Milczarski will say only that "it's the same rule in any operating business: you have to keep the costs down".

Local factors complicate the task facing central and eastern European carriers, in Milczarski's view. "This part of the world hasn’t been, I would say, mentally equally prepared to protect the interest of local carriers," he says.

Nonetheless, he is confident that region, with its rising economic power, needs its own network carriers. "For us, geographically, to go to western European hubs to fly to the Far East doesn't make any sense."

Grant perceives IAG to be "two or three tranches of efficiency enhancement and cost restructuring ahead of some of the other groups" in Europe. But he acknowledges that it is "extremely emotive to talk to any group of employees about processes, terms and conditions, infrastructure, etc, when the sun is shining".

Weston, meanwhile, makes the novel point that costs must be scrutinised at every level. "We all obsess about labour agreements – there’s a bunch of other restructuring you can do. You can restructure your head office. You can start in the management."

Such is the dominance of low-cost carriers, now, that he sees the very label itself as redundant. "If you've got a really crap cost base, you're unlikely to be a winner. In most industries, we don't put in this artificial dichotomy."

As to the potential of the proposed EU aviation strategy to improve the industry's fortunes, Hanlon is encouraged that the Commission "has identified the right focal points".

However, the Commission's description of its own proposal as "ambitious" raises a quibble with a lawyer on the panel. "The fact that we use the word 'ambitious' does not make it so," says Watson Farley & Williams partner Jeremy Robinson.

Milczarski, meanwhile, is not encouraged by the EU's track record on implementation of policy changes, drawing a lesson from his past in the rail industry. “I was very confident about the 4th railway package – ultimately, it's being introduced pretty much toothless.”

Talk of Europe leads inevitably to discussion of Brexit. Robinson cautions that "a close 'remain' vote does not dispose of Britain's difficult relationship with the EU".

And if the verdict goes the other way, "the process of leaving the European Union is a complex legal one". Plus, "trade deals take a lot of negotiating" and "aviation is very difficult to isolate from everything else".

Milczarski sees the Brexit debate as part of a wider one about the EU's functioning stoked by UK politician Nigel Farage, who he describes as a "skilful, wonderful speaker" and "very powerful politician and MEP… sometimes in a pretty rude way".

The LOT chief adds: "I hope the EU doesn't treat Brexit as a one-time event… and that people look at what is worrying the voters around Europe and in Britain in particular."

But for Grant, "the industry has far bigger issues to worry about" than Brexit. "Nothing will change at least for two years."

Source: Cirium Dashboard