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Has Low-Cost Flying Finally Hit the End of the Runway?

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What do the EU's plans mean for RyanAir and small airports? Photo: Pauls imaging.
What do the EU's plans mean for RyanAir and small airports? Photo: Pauls imaging.

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.

Subsidy hypocrisy

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.

About the author

Hilary Bown

An academic by training, a writer by day, and a Cheapo by heritage, Hilary Bown's meagre means and insatiable travel appetite have helped her sharpen her "no-budget travel" skills across the European continent over the past decade. At home in Berlin or on an adventure abroad, you'll find her in sandals, riding the bus, reading novels while walking, drinking the local wine, writing out postcards with a felt-tip pen, and browsing the shelves of the supermarket and hardware store. Find her unique blend of travel adventure and tested advice at Less Than a Shoestring.

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3 Responses to “Has Low-Cost Flying Finally Hit the End of the Runway?”

The Lovelock Machine says:

It is a weak argument to suggest that taxpayers should in any way support the budget airline sector because it has something to do with “attracting spending to our region, providing employment, and improving the mobility of our citizens.” Those three goals are all laudable, but subsidising smaller regional airports (and thus budget carriers) is the most elliptical and wasteful way of going about reaching those goals. This article reads like a covert plea for cheap flights, gilded with some decent social rhetoric. States should of course do something to promote employment and to improve mobility. But trams and trains, please, not subsidies to airports for those who fly for fun – and often with wanton disregard for the environmental consequences.

Hilary Bown Hilary Bown says:

Thank you for your comment.

I am absolutely a fan of improved transit and public transportation. Clearly, those are excellent and sustainable ways to provide employment and increase mobility in any region.

That said, I am also a fan of “fly[ing] for fun” and regularly enjoy time in destinations — from Luxembourg to Bergamo to Newquay — that I would probably never have visited were it not for the fact that my budget flight originated or ended somewhere near there. On this point, it sounds as if we have divergent philosophies on the “proper” speed of travel and the “legitimate” use of air travel.

Weighing the costs (time, price, CO2 emissions) and benefits (time, price, CO2 emissions) of flights vs. trains is something each traveler must do for themselves. The existence of high-speed rail lines alone does not ensure that on a journey to Spain from Germany, for example, rail will be the most economical option — I am certain, given the distance and therefore time involved, that most people would choose to fly. I’m not sure why people living in the isolated Hunsrueck area (near Frankfurt Hahn airport) should have any less opportunity to fly there than people in Berlin (home to two airports). I am interested in hearing your argument for centralized, large (also heavily subsidized) airports with gates and prices controlled by major airlines over decentralized, smaller (subsidized) airports primarily frequented by low-cost carriers. Having grown up in the US, I am not convinced that the former system is actually better for consumers or citizens.

As I noted in the article, the economic impact of such airports for second- or third-tier destinations is embarrassingly underexamined, making it difficult to discuss the costs and benefits to a region more than anecdotally.

Professor Cohen says:

Kudos to Lovelock, kudos to Frau Bown for so perfectly unpicking the arguments. Thought this was a travel blog, but see it has shifted into a grad-level economics forum. My take? Well, YES, in a word. Low-cost flying has hit the end of the runway. But that I think has little to do with economics. It is more to do with social changes and the growing awareness of some Europeans that their flying habit was unsustainable. We are all well aware nowadays that each flight is one more hit at the ozone layer. Each take-off spells the end for another polar bear.

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