Saying goodbye and good riddance to Europe’s airlines

Date: 11/10/01

By Gareth Harding

LAST week, I booked a return ticket from Brussels to Carcassone with Ryanair for the princely sum of 525 Belgian Francs (13 euro). For the same price I could have flown to London, Venice, Dublin or a handful of other destinations.

Alternatively, I could have logged onto Sabena's website and forked out between 10 and 20 times more for the privilege of having a numbered seat and a stale sandwich. Plus I would have had the headache of not knowing whether Belgian's flagship carrier would still be in business by the time I flew. Many people have shed crocodile tears for Swissair and Sabena since news of their impending collapse was sprung on an unsuspecting world last week. For the thousands of workers who risk losing their jobs as a result of falling demand, the papers must indeed make for grim reading. But for travellers who have had to endure decades of shoddy service and inflated prices, it is potentially the best thing that has happened to the sector since it first started opening up in the 1990s. 'Goodbye and good riddance' should be their message to Europe's ailing state airlines.

For years they have flitted away money with reckless abandon. Swissair managed to run up a €2-billion loss last year and most other flag-carriers are in the red; they have indulged in blatantly anti-competitive practices which have kept prices artificially high; and they have failed to address the serious environmental problems caused by the almost exponential growth in air traffic.

But since last month's terrorist attacks on the United States, national airlines have sunk to new depths. Companies such as British Airways and KLM have axed hundreds of flights and laid off tens of thousands of workers in response to falling demand. This is a shocking way to treat both customers and employees. Since 1980, air traffic has been growing by about 8 per year and is set to double every 10-15 years. Despite the current dip, there is little reason to believe that growth rates will not return to normal, as they did after the Gulf War a decade ago. So why the knee-jerk response?

Most companies plan for a downturn in the economy, but state airlines refuse to play by market rules. Instead, when faced with sluggish growth, they come cap-in-hand to the treasury, begging for more funds and extra taxes to be slapped on passengers. The United States has already coughed up 10 billion (€10.8 billion) to bail out its airlines, and now Europe is following suit.

Last week, the Swiss government gave its heavily indebted state airline a cash injection of €300 million and Belgium swiftly followed suit with a €125-million bridging loan for Sabena. The European Commission is currently looking into whether such emergency help flouts its state aid rules. Ryanair CEO Michael O'Leary clearly believes it does.

In a statement issued shortly after the 11 September atrocities, the Irish entrepreneur rightly said that governments should cut passenger taxes and landing charges at European airports rather than dole out subsidies to "inefficient and loss-making airlines".

Low-cost airlines are also up in arms about Commission's decision to suspend the 'use it or lose it' rule which dictates that airlines using less than 80 of their landing slots should cede some of their excess rights to rivals. Instead of allowing governments to throw a lifeline to national airlines, the Commission should use the current crisis as an opportunity to introduce more competition into a notoriously closed market.

This has been the response of no-frills airlines, which have slashed prices and seen passenger levels jump since 11 September. UK-based carrier easyJet reported a 25 traffic increase in September, proving that people are not afraid to travel if the price is right.

For decades it has not been, and state airlines must shoulder the blame for denying generations of Europeans the right to fly at affordable prices.

Feature on the crisis facing European airlines.