AIRLINE

Airline Transportation



Airline Transportation

Introduction

As in other European Union (EU) nations, two circumstances have affected the fortunes of third level airports in France in recent decades; the liberalisation of the domestic market and the progressive deregulation of air transport within the EU (Graham and Graham).

Until 1974, the airline industry in France was highly regulated. In addition to the virtual monopoly of Air France on international routes, Air Inter (in which Air France was a major shareholder), held a quasi-monopoly on domestic flights, including after 1964, State subsidies on unprofitable routes considered important for regional development.

However, by the end of the 1960s, Air Inter preferred to abandon unprofitable routes in order to concentrate on lucrative trunk routes and in 1974 a new convention was signed with the State giving Air Inter a monopoly on a defined network in return for a withdrawal of subsidies. This partial liberalisation gave an opportunity to small private airlines to develop routes, both from provincial towns into Paris and transverse inter-regional routes.

Such airlines initially received start-up subsidies and were also allowed to receive subsidies from local authorities and Chambers of Commerce. Subsequently, the progressive deregulation of air transport within the EU enabled private companies to develop international routes and foreign airlines to operate into France. The 1970s and 1980s thus witnessed a proliferation of new airlines based on regional and local airports, albeit with a fragile financial base.

Although the objective of achieving a single internal market is a fundamental premise of the EU, the completion of air transport deregulation in the Community occurred later than in the United States and in a more phased fashion (Merlin, 2000a). In part this resulted from a determination to avoid the brutal impact that characterised American deregulation but also reflected many fundamental differences between the United States and the EU.

Much smaller in geographical space and with shorter distances between major agglomerations, the threat of congestion at major airports and the greater competition from alternative transport, notably the high-speed train, implied a very different operating context. Moreover, the differing legal systems of the member states and the existence of numerous bi-lateral treaties made for greater complexity in achieving liberalisation. Undoubtedly the entrenched position of several State-owned airlines was a further obstacle to increased community-wide competition.

As a consequence, liberalisation advanced by a series of three “packages” of legislation, in 1987, 1990 and 1992, which progressively liberalised such matters as air fares, access to routes and airport slots and the question of subsidies. By 1997, the right to “cabotage”, the opening up of internal markets to competition from airlines of other member states, had been enshrined in Community legislation.

The advantages to be gained by the consumer were anticipated to be reduced fares resulting from greater competition, the opening up of new routes and improved service and convenience to the customer as a result of competitive marketing. The ending of monopolies acted as an incentive to new airlines to enter the market, which in turn gave an opportunity to relatively minor airports ...