Higher Cost for European Consumers and SMEs through Airline Consolidation
On February 18th 2020 SME Connect hosted a working breakfast on “Higher Cost for European Consumers and SMEs through Airline Consolidation”. Recent mergers and other partnerships of larger airlines have restructured the market and therefore promoted consolidation which inevitably impacts small and medium-sized enterprises of the sector. Airline consolidation can result in disadvantages not only for the airlines but for travellers, consumers and also the airport sectors as well.
The discussion was joined by Karlo Ressler MEP (BUDG); Marian-Jean Marinescu MEP (TRAN); Emmanuel Mounier, Secretary- General of EU travel tech; Jörg Troester, Board Member of European Regional Airlines Association; Christopher Irwin, Vice- President of European Passenger Federation and Domagoj Ivan MIlosevic MP, Chair of the Croatian Parliament´s committee for European Affairs and Vice-President of SME Europe of the EPP; Maria Grapini MEP (Vice-Chair IMCO) Board Member of SME Connect and Pilar del Castillo Vera MEP (ITRE).
40% of the European market is controlled by the top four airlines – Ryanair, Lufthansa, Air-France-KLM and IAG #Big4 which enhance the pressure on smaller airlines to remain competitive.
Karlo Ressler MEP (BUDG) opened the debate talking about the impact of airline consolidation on tourism and competition in his home country Croatia from the perspective of the Croatian Presidency in the EU. He stated that Croatia relies heavily on the airline connectivity, especially the tourism sector which is not only a vital source towards the regional GDP. “The Croatian Presidency focuses among others on the enforcement of the Single European Transport Area.” Improving the Trans-European network and within this encouraging further extension to neighbour countries is crucial, especially for the border countries of Europe. Airline Consolidation has a huge impact on regional connectivity as airlines consolidate and makes it harder for smaller airlines to compete. However, “mobility and access affect the sustainability of travel and tourism and since the transport sector counts a fifth towards the GDP it also affects the regional growth of Croatia.” Karlo Ressler further addresses the European Union to ensure a more “competitive landscape that allows big and smaller airlines to compete on equal footing which will benefit the consumers and the economy as a whole. The European Commission must safeguard consumers’ rights.”
We need to tap into the economic potential of SMEs in aviation. Mobility is the base of the economy.
Marian-Jean Marinescu MEP of the committee on Transport and Tourism (TRAN) highlighted the importance of the role of transport in context of the European Green Deal. “Short flights will bring advantages not only by lowering the CO2 emission but also because a small aircraft could be adapted for electric engines,” because small airlines can connect regional airports directly e.g. without having multi-stops. He further said that regional airports are important for mobility and connectivity which is the base for the economy of Europe.
Less connectivity, higher prices and lower quality of service for the customer.
The Secretary- General of Eu travel tech, Emmanuel Mounier, also sees a strong consolidation trend which drives the market power hence triggers discriminatory initiatives by larger carriers. Consolidation makes it more difficult for the costumers to have as much transparency as they need to find the most sustainable, cheapest and shortest options available. “Small Airlines are very important for connectivity in Europe.” However, through airline consolidation, small airlines are not feasible anymore which also results in “less connectivity, higher prices and lower quality of services,” for the costumers. “We believe that you as travellers deserve a competitive market and to get there you deserve to have some transparency on the market, and currently with those big players with huge market power you don’t have the transparency you deserve.”
Airlines are disappearing and regions are cut off from economic development.
Jörg Troester, board member of the European Regional Airlines Association, explained how the #Big4 dominate both the market share and distribution channels, preventing smaller aviation from having equal access to a consumer base. Large airlines in Europe have indeed a strong position, they have well-known brands and well-developed distribution channels which brings a burden on smaller and regional airlines to keep the cash flow and to stay on the market to promote and sell their products. “For the European Regions Airline Association and their members, it would be important to have the Code of Conduct reviewed and updated to have fair competition that allows access to the market through the distribution channels for all airlines with the same possibilities and the same chances,” which also means similar rules and obligations. Throughout the last years it is obvious how much consolidation we have had, “airlines are disappearing and regions are cut off from economic development. Flying for certain regions is essential for the people and the economy,” he further said. He pointed out the importance of aircraft production and aircraft developments. “We need new technologies,” he said. For instants, “50-seaters are the perfect example to go electric and to go with new concepts for the engines,” which ensures the reduction of CO2 emission and the competitiveness to bigger airlines.
Empowering confident consumers, who are the key to a competitive and successful economy and society.
We have to have a regulated aviation market which needs to be updated not rolled over”, said the Vice-President of the European Passenger Federation, Christopher Irwin. He also highlighted the importance of a more competitive market as a core basis of airline regulation, code of conduct, consumer protection etc. “We need to address a number of threats: airline consolidation and monopoly, especially whether monopoly, in the end, can’t deliver the degree of consumer choices and economic development that full competition can deliver.” He further argued, “the weakness is that enforcement has been poor, it is very hard to get the Commission to take action, we should be addressing the changing external environment to make sure it’s more sustainable”. Moreover, “we should be striving for a fair deal for passenger based on transparency and on easy compatibility which empowers confident consumers who are the key to a competitive and successful economy and society.”
The Chair of the Croatian Parliament’s committee for European Affairs and Vice-President of SME Europe of the EPP, Domagoj Ivan Milosevic MP, briefly stated that airlines are not any longer only another business sector but it is a part of the infrastructure which is very important for the whole world. “We have to be aware that the consolidation is going on but the competition coming from some Middle-Eastern European countries is heavily subsidised. It’s not the same game for those countries which do not follow transparency of subsidization of their airlines.” Domagoj Milosevic emphasized, “we have to have smart regulations however we need to avoid oligopolies, in favour of all passengers and the SME sector.”
Visit our flickr page to access the photos taken during the event