Strategic Meetings Summit London, 26 September,
September 29 2022, Kimpton Fitzroy London
Friday 30 September 2022, JW Marriott Grosvenor
For our monthly ”On The Soapbox” and following last week”s ”Comment” column regarding Transatlantic air service, Sir Michael Bishop, chairman of bmi, and one of the UK's most respected airline chiefs, has his say.
Fuel price rises, air traffic control system problems, the continuing conflict in Iraq. 2004 is proving to be yet another year in which ”events” continue to deliver challenges to aviation.
Yet the coming week offers the potential for ”events” to play a far more positive role for the industry.
On Thursday and Friday, the European Council of Transport Ministers meets. And on the agenda is a potential aviation liberalisation deal with the USA.
If the latest proposals are received positively, we could see the first steps towards deregulation of the largest international air travel market in the world.
I am talking not of the whole Europe-US market but simply of transatlantic routes from the UK. More than 16m people fly between the UK and the US each year ” even in the tough travel market of the last few years. It is easily the largest international aviation market in the world. Yet it is also one of the most heavily regulated. Only four airlines are allowed to fly from our premier airport, Heathrow, to the United States. And even from other UK airports, there are a string of regulations that hinder competition.
This I feel is somewhat ironic. After all, the United States and the UK have been at the forefront of air travel deregulation within their own markets. The US blazed the trail for liberalisation of domestic, and then international, aviation and we saw the positive results as their market boomed.
The UK led Europe in introducing domestic deregulation, allowing my own airline, as well as others, the opportunity to bring much needed competitive new services to the consumer. It was then at the forefront of encouraging deregulation in Europe, creating a massive, open market in air travel.
No traveller would argue about the benefits this has brought. European air travel is now more competitive than at any time in the history of the market. Even the airlines would accept that, whether willingly or not, they have developed healthier and more effective businesses as a result of new competition. It was open competition that enabled the now burgeoning low cost carriers the opportunity to compete in the first place. The defence of the objectors to that freedom claimed at the time, that such freedom would damage the industry, as there would be insufficient traffic to go around. How shallow those claims must now look.
So how strange that a quirk of history means the UK-US market is the least competitive ” and most expensive ” in Europe. Because of Bermuda II, business class fares from Heathrow to the States are higher than from any equivalent European airport.
This could all be about to change.
Latest negotiations between the EU and the US administration have agreed the main elements of the first stage of an OAA.
There are issues which appear to be deadlocked ” but these are the usual ”red herring” issues of ownership, right of establishment, Fly America and cabotage. If I was an airline trying to defend a dominant oligopoly position, I guess I would lobby on these issues too. We should not be surprised that objectors to freedom in the UK domestic market all those years ago, appear also to have objections to the opening up of the UK to USA market.
The ”red herrings” may work again this week, delaying the first steps of deregulation. But if they do, the delay will only be temporary.
It is clear that both sides have a genuine desire to liberalise the market between the EU and the US. And I have no doubts that liberalisation will come. Perhaps not this week, but it is on the way.
The resulting freedom of competition in this market may be uncomfortable for some carriers, which have been able to count on overly profitable transatlantic routes as the crutch for other operations.
But, as in the US and as in Europe, the long-term result will be seen in new choices for consumer and fares falling to more realistic levels.
bmi is ready to take advantage of liberalisation, as we have done before. We look forward to the change that is coming.