Airlines bid to break free from state shackles

Date: 25/05/2000

By Bruce Barnard

Europe's airline business, once a symbol of government protection, profligacy and meddling, is fighting to free itself from the state's shackles so that it can compete globally.

But politics will stalk air transport for some time to come as the entire industry is throttled by bilateral air traffic agreements dating back to the 1930s.

The make-or-break influence of aeropolitics was highlighted by the fact that Swissair's bid to take control of Sabena hinged on the outcome of last weekend's Swiss referendum on a package of measures to create closer economic ties with the Union. If Swissair, a foreign carrier, had taken majority control of Sabena before the accords had been approved, it would have lost most of the Belgian carrier's international flight rights.

But while national carriers cannot disappear, they can at least fall under foreign control under certain conditions - a remarkable achievement given that, until five years ago, airlines were prestige symbols which were beyond the normal rules of international business.

Air France apart, there are few airlines in Europe which place a premium on nationality at a time when their very survival is threatened by the consolidation sweeping the industry. KLM, on the look-out for a partner again following the collapse of its short-lived joint venture with Alitalia, says it is prepared to be a junior partner in a merger. "Given our position it would be extremely unwise to exclude that," says chairman Leo van Wijk, who adds that loose alliances will not work anymore. "Only true mergers can yield what the industry needs."

KLM was prepared to give up its name and logo eight years ago when it almost clinched a merger with British Airways. There is talk - denied by KLM - that this 'dream ticket' is about to be revived without a hint of pressure from either government.

KLM's Van Wijk says the European Commission's bid to negotiate a common transatlantic area between the EU and the US could finally deliver airlines from 'aeropolitics'. This, he says, would allow airlines to "do what other companies have done for years and see as normal".