Air Transport World

Tweaking the establishment.(European airline competition)

Low-cost airline operations appear in Europe, despite obstacles such as franchising and short-haul jet operations

Is European airline competition a contradiction in terms? Maybe not, if recent examples of bucking the Establishment become standard, rather than just ripples. On the other hand, pessimists feel the major airlines' franchising and short-haul jet operations, plus physical and policy impediments, may preclude everything but niche competition from becoming reality. Indeed, even some in Brussels are no more than "medium optimistic" about the future of competition.

First, the good news. Example 1: Former charterer AOM French Airlines has added scheduled domestic and international services steadily. But the government really stirred AOM's competitive juices when it said the carrier must move from shiny, rebuilt Orly Ouest to tacky Orly Sud--home to non-French airlines--to provide more space for Air France/Air Inter. AOM rebelled and to build public support for its cause, painted "Je veux rester a Orly Ouest [I want to stay at Orly West]" on the fuselages of several already-colorful aircraft.

In the last two years, though only with prodding by the EU Commission, France has risen to the top of the U.K. CAA's chart of competitive countries. A CAA staffer says: "France is really starting to heat up now." By the end of 1995, several domestic routes had more French competitors than three years before, chiefly at Air Inter's expense, as well as competition from outside the country. Expanding Air Liberte could become an even bigger thorn in Air Inter's side if it raises more capital through a public offering next year and acquires AOM, as rumored. AOM's backer, money-losing Credit Lyonnais, must dump some assets.

The French carriers--including AOM, which once preferred to compete on service, and Air Inter, now called Air Inter Europe--also are competing on price. Moreover, Air Inter, having lost its domestic monopoly, has canceled the A330s ordered in precompetition days. The new competition, plus the impact of French restrictions, also has caused TAT, controlled by British Airways, to rejigger its plans.

Example 2: Another charterer-turned-scheduled line, Eurobelgian Airlines, the new entrant that is being taken over by Virgin Atlantic, also challenged the Establishment. So far, competition has eluded the EU [cents]'s home airport and EBA's base, Brussels Zaventem, though others such as TEA have tried and failed. …

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