Airports see change on the horizon

Date: 26/09/1996

By Michael Mann

THE winds of change are blowing through Europe's airports, forcing them to fight a desperate rearguard action to defend the quietly profitable position they have built up over the years.

Threatened by potential losses they estimate at 30&percent; of their total revenue, airports are renewing their battle to persuade Internal Market Commissioner Mario Monti not to phase out duty-free sales in mid-1999.

The Airports Council International (ACI) has painted the possible effects of the plan, confirmed in a Commission report published just before the summer break, in the blackest possible terms.

It argues that with passenger numbers set to double over the next 12 years, duty-free must remain if airports are not to make increasing demands on both taxpayers and airlines.

The ACI puts the value of the trade at 5.2 billion ecu a year, of which 3.5 billion is spent by passengers on intra-EU routes.

Countering arguments that national exchequers would gain by a return to the payment of duty on cigarettes, alcohol and perfumes, the ACI points to a 1989 study by consultants Coopers and Lybrand suggesting only a quarter of lost duty-free revenue would be re-couped through duty-paid goods.

Defenders of the system claim airports would be forced to make up the shortfall in income by raising the charges paid by airlines.

In the worst case scenario, this could lead to a 14&percent; rise in airfares, higher rents for other airport shops, more expensive holidays - and it could even sound the death knell of a number of small airlines.

The powerful civil aviation lobby believes this flies completely in the face of the Commission's efforts to open up the EU's skies to full competition.

“Our duty and tax-free revenue is vital if we are to provide the necessary airport facilities for the liberalised air transport market at the lowest possible costs and without making substantial demands on taxpayers,” claims ACI's director-general Philippe Hamon.

Employment questions could prove an even more effective weapon in the armoury of the duty-free lobby. In an era when the EU has made the quest for jobs the number one priority, they point out that duty-free trade employs 100,000 people either directly or indirectly.

Taking another tack, the European Air Carrier Assembly believes airports would have to claim state subsidies to replace money previously earned in duty-free emporia, a development hardly in keeping with member states' efforts to tighten their belts in the era of the single currency.

But despite all these arguments, the Commission seems determined to stand firm, insisting that duty-free shops are incompatible with the goal of completing the single market.

The renewed debate comes at a time when airlines and airports are squaring up for a fight over Commission plans to regulate airport charges. Naturally, the airports would prefer weak guidelines, while airlines are looking for a tightly regulated system so that savings can be passed on to users.

In a recent survey of 22 European airports, landing charges for a Fokker 100 were found to vary between 0.25 and 2.21, taking one as the EU average. Charges were also found to be considerably higher for international flights and small business jets.

The ACI has jumped into the debate, claiming charges would inevitably rise if a precise link was established between the level of the charge and the type of aircraft.

Europe's airports also await clarity on a policy which seems certain to shake up the way they have been doing things for decades. When transport ministers meet in Luxembourg on 3 October, they are expected to adopt a common position on the second reading of plans to liberalise groundhandling operations at EU airports.

This comes after MEPs voted in July to accept the Council of Ministers' initial common position, against the advice of its transport and tourism committee.

The deal thrashed out by ministers last December followed months of intense lobbying and political pressure. It foresees the phasing out of airports' monopolies on baggage handling, catering and refuelling at all but the smallest airports.

Monopolies must be phased out by 1999, although airports will be able to apply for a two-year derogation. Existing duopolies will be given two years longer.

Services such as check-in and ticketing will have to be liberalised at all airports by 1998, while deregulation of tarmac services at airports carrying at least a million passengers a year will take place by the same date.

Operators independent of the airport authority and the dominant airline will have to be allowed in by 1999 at airports dealing with over three million passengers annually. This threshold will fall to two million in 2001.

However, the Association of European Airlines (AEA) is far from satisfied with the result. “While the original proposal from the Commission was unsatisfactory to the airlines, it was further watered down by the Council in a round of unashamed political deal-making,” it claims.

The association believes the rules could prevent airlines from entering the groundhandling market, and result in resident airlines being excluded from the market entirely.