Air Transport World

Unscheduled moves; as the European Community moves toward deregulation, its charter industry is facing a shakeout.

As the European Community moves toward deregulation, its charter industry is facing a shakeout

Under the Van Miert Commission's Third Package of European Community reforms, the distinction between regularly scheduled and charter services will be eliminated. Because the package eases entry into new routes, airlines will be able to choose routes and prices, and market their products as they wish. Many think that the major carriers will take advantage of this freedom to move in on Europe's lucrative charter markets.

But the charter companies are not ready to throw in the towel. Many are backed by major conglomerates with deep pockets and are accustomed to operating in a very competitive market.

"That's something that Europe's schedules carries can hardly claim," say one charter company executive. Although few analysts expects the Third Package proposals to be altered substantially before adoption, charter operators are working hard to get them changed.

Historically, charter services have played a much more important role in European aviation than they have in the U.S. The 40 European charter companies use 600 airplanes to carry 50 million passengers every year, accounting for 67% of all international EC passenger-kilometers, according to the Brussels-based trade group the Association des Compagnies Aeriennes de la Communite Euopeene (ACE).

But with the proposed changes, the heavy traffic could fall off, analysts say. "The major carriers have long been eager to get a larger share of the charter market," says Tom Bass, an economist with the U.K. Civil Aviation Authority. "Deregulation should cause some flowers to bloom."

The "blooming flowers" would be major carriers working in the charter mode. "If the scheduled airlines can scale down their indirect costs--at least for specific routes--they could easily begin to compete with the character operators," says David Thompson, an airline-industry analyst with the London Business School. …

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