Editorial: When airlines say it best

By Olivier Jankovec, Director General, ACI EUROPE

European Commission decisions on competition & merger cases rarely make for juicy reading, unless of course you are a lawyer, or you have a particular interest in the subject matter. The latter is certainly the case for airports when it comes to the decisions published earlier this year on the Air Berlin/Lufthansa & easyJet mergers. Not only do these Commission decisions show that airports have become the battleground for airline competition, but they also confirm that airlines are able to exercise significant dominance over larger airports.

What is even more interesting, is the fact that airlines themselves are the ones pointing this out – by way of the comments they sent to the Commission while it was assessing the impact of Lufthansa and easyJet taking over Air Berlin’s aircraft, crews and airport slots. So, as you can imagine, it would be quite remiss of me not to share these airline comments with you, as duly reported by the Commission in its decisions:

“Controlling a large slot portfolio and the operations associated therewith also enables airlines to exercise significant pressure on the respective airport (…) such behaviour clearly limits the commercial freedom of the airports, potential airline new entrants and thus ultimately the choice of customers – individual passengers and tour operators alike.”

“A dominant airline has numerous possibilities to use its influence at an airport in order to foreclose the airport for competitors [notably by using its negotiating power and] this influence to develop the airport infrastructure even more in its own favour”.

All this will be familiar to many airports across Europe. They are experiencing first-hand the increasing dominance and pressures that come from large and powerful airline groups. Slowly (for now) but surely, airline consolidation has advanced on our continent. Along with other market developments – think airline hybridization by way of LCCs moving upmarket and FSCs trading down flexibly – consolidation means fewer airlines, with more market power.

Beyond specific anti-trust cases, this is something the Commission ought to reflect upon as part of its Aviation Strategy for Europe. If the Aviation Strategy is about connecting the dots and putting consumers first, then surely the Air Berlin case gives much food for thought – and hopefully even more: cause for action.

Apart from pointing to increasing airline market power over airports, the Commission decisions state: “the current EU rules do not have a sufficient deterrent against the anticompetitive use of slots”. This surely calls for a reform of the EU Regulation on the allocation and use of slots. As it stands, it’s no secret that the current Regulation essentially legitimates a system designed by incumbent airlines for incumbent airlines, decades ago.

But the fact that airlines are able to exercise market power over airports should also guide the Commission in its ongoing evaluation of the EU Airport Charges Directive. In its preliminary findings on the evaluation presented in May, the Commission expressly acknowledged that competition amongst airports of all sizes has increased and that there is no clear evidence of misuse of market power at any airport in Europe.

Market outcomes confirm this assessment and clearly challenge the need for more regulation of airport charges. Rather, it is high time to ‘normalise’ the airport-airline relationship. This implies a recognition that airlines interest cannot be a proxy for passenger interest – as evidenced by the recent ICF study on airfares (more on that, in this issue).

As Alexandre de Juniac, the Director General of IATA just said: “Regulators must recognise the power of competition” and “Governments should not distort market effectiveness with regulations that second guess what consumers want”. Airports cannot agree more.

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