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In our last post, we examined the pressures that national governments and discontented employees are causing for Europe’s most popular airline, Ryanair. In this post, we’ll look at forces at work in the European Union and what effects this could have on the low-cost airline model in general.
End of small airport subsidies?
Bloomberg Businessweek reports that EU antitrust legislators are working to make member-state subsidies to smaller airports in their countries a thing of the past, a move that would not only decrease the existence of flights to these smaller destinations, but that also threatens to take down the low-cost airline industry with it. Ryanair, EasyJet, and their competitors depend upon the low taxes, available gates, and financial “partnerships” at these regional airports and reinvented airfields to offer a large number of destinations and routes to consumers at a small price.
These proposals come in the wake of 23 investigations into antitrust infractions involving small airports and low-cost carriers across the EU. While the Association of European Airlines, an interest group representing major carriers, is not incorrect in claiming that such subsidies cause “competitive distortion,” it is specious at best for the pot to call the kettle black. Subsidies regularly support the airline industry, from the development of new planes to the airport and navigation infrastructure needed for every plane to fly – the only difference between hubs and regional airports is the ability to be self-sustaining through taxation, and that remains above all a question of traffic.
Can small airports survive?
Smaller airports don’t have it easy in this respect. Furthermore, low-cost carriers, with their more powerful negotiating position, regularly use their market share to bully and threaten their airport partners into meeting their needs fully, at low price and with few demands. Yet, individual EU states have a serious financial and social interest in keeping regional airfields open to traffic, the economic impact of which is highly touted and notably understudied.
Is there a happy medium between Ryanair’s all-low-cost-or-nothing attitude towards airports, customers, and employees alike? How much are we as consumers willing to pay in order to ensure the fair treatment of all involved? Further, how much are we as taxpayers willing to invest in order to attract spending to our region, provide employment, and improve the mobility of our citizens? If EU regulators have their way, we should know the answer within the next ten years.