Kinnock banks on new airlines to cut the cost of flying

Date: 05/09/1996

By Tim Jones

THE European Commission will rely on burgeoning competition in the continent's skies rather than a raft of legislation to bring down Europe's inflated air fares.

Even though the price of a standard 800-kilometre economy fare in Europe still tops that charged in the US by 100 ecu, Transport Commissioner Neil Kinnock is confident that the growing number of new airlines springing up across the EU will narrow this gap.

In a 60-page draft report on the internal civil aviation market due to be adopted by the European Commission next month, Kinnock will call for improved access to key airports for non-established airlines.

The forthcoming review of the three-year-old regulation governing how airlines' take-off and landing 'slots' are allocated will provide the Commissioner with an opportunity to make life easier for the smaller airlines. Possible reforms include offering new entrants at an airport first bite at the slots that become available, up to a given quota.

The report concludes that airline liberalisation is already having a positive effect on fares. While capacity constraints and increasing commercial travel have meant that standard business fares have risen by as much as 2&percent; over the past year, the cost of economy class tickets has hardly increased and, in some countries, has fallen considerably.

This has largely been the result of increased competition for the incumbent carriers.

In France, for example, economy class fares tumbled as Air France Europe came up against AOM, Air Liberté and TAT following the introduction of competition in the EU.

Last October, Lufthansa cut average economy class domestic tariffs by as much as 5&percent; in anticipation of the arrival of full-blooded competition from Deutsche BA.

Nevertheless, news last week that the German authorities were investigating alleged overcharging by Lufthansa between Frankfurt and Berlin, a route the airline dominates, underlined the difficulty of relying on slot allocation to enforce fairness at a congested airport.

But Kees Veenstra, deputy secretary-general of the Association of European Airlines, points out that many airports in Europe are not congested, and adds: “If you want to fly out of Heathrow, that is a problem, but EasyJet has shown how this can be avoided.”

No-frills airline EasyJet is operating successfully between London and Scotland as well as to Amsterdam by flying out of the under-used Luton Airport, north of the UK capital.

Certain regions remain a problem, such as Scandinavia, where tickets are notoriously expensive.

“The reason for the high level of fares in Scandinavia is that SAS have, until now, had a monopoly,” says Claus Brogger of the Danish Consumer Council. “With new companies coming into the market, we should finally see the prices starting to come down.”

Today (5 September), Virgin Express - formed after Richard Branson's Virgin Group bought low-cost carrier EuroBelgian Airlines - begins a daily service from Brussels Zaventem to Copenhagen at an unrestricted single fare of 70 ecu. To the Commission's satisfaction, SAS has responded by halving its cheapest Saturday stop-over return ticket price to 170 ecu.

While admitting that Virgin's move prompted the reduction in its fare, SAS denies it is a high-priced airline.

“You cannot say that SAS prices are high since they compare favourably with other airlines operating on the same routes,” says Göran Forsberg, the company's pricing director.

The Commission welcomes the approach of the small airlines in offering flat-rate tickets with no restrictions, but realises that this cannot be emulated across the market. Complex ticketing structures will stay as carriers vary prices and conditions in order to fill their planes.