A VIAT ION
of states and geopolitics and this “buffeting” can become severe turbulence. Regulation is oſten thought to stifle innovation,
How things change – Easyjet was the biggest carrier at Gatwick in 2017
54
but that doesn’t always hold true. States have traditionally controlled air travel in the form of bilateral air services agreements (ASAs), which regulate the number of flights and airlines permitted to operate between countries. An airline can only operate services where these ASAs allow it to. Traditionally, ASAs were restrictive and protectionist, harking back to the “glory days” when state-owned airlines dominated the industry. With global trade increasing, it has been the loosening of these ASAs – as part of what the industry calls “liberalisation” – that has allowed increased competition, with free market access leading to a greater movement of passengers and cargo. Tat was certainly the case in 2016, when the UK and
China agreed to expand the number of flights permitted between the two countries from 40 per week for each nation up to 100 (which subsequently rose to 150 in 2017). Restrictions on the number of destinations that the airlines could serve were also liſted – meaning that flights could now operate from any city in the UK to any city in China. Previously, airlines could only fly to six destinations in each country. Off the back of this expansion, airlines such as China
Southern, Hainan Airlines and Tianjin Airlines have commenced direct services from their regional Chinese hubs to the UK. Direct services from Tianjin and Chongqing to London, for example, would have been unthinkable ten years ago when services were largely limited to the state flag carriers such as Air China and British Airways operating between the main hubs of Beijing, Shanghai and London. Still, this change hasn’t been good for everyone. Te rising presence of Chinese carriers has been a headache for the British Airways. It was forced to stop services to Chengdu in 2016 due in part to this significant rise in competition from Chinese carriers flying similar routes.
S E P TEMBE R 2 0 18
LIBERALISATION AS DISRUPTION Liberalisation as a form of deregulation has been disrupting the airline industry for the last 30 years by breaking monopolies, increasing competition and setting the stage for the airline industry of today. It was first pursued by the United States in the early 1990s, in the form of bilateral open-skies agreements, so that carriers could operate any route between countries without significant restrictions on capacity, frequency or price. Te same happened in Europe with the creation of the single EU aviation market
in the 1990s, which put an end to the system of individual ASAs between EU member states – the effect being that European airlines could operate freely within the EU, something we take for granted today (although Brexit may change that). In 1992, the EU signed its first open-skies agreement
with the United States, which is one reason why there are more flights per day between London and NYC than there are between London and Dublin. In Asia, the ten members of ASEAN (Association of Southeast Asian Nations) introduced the framework for an open-skies agreement in 2015, although implementation remains ongoing, and similar open-skies agreements exist in many other markets.
LOW-COST CARRIERS Te liberalisation and deregulation of open-skies agreements has created the conditions for the greatest disruption in aviation of the last 40 years – the rise of the low-cost carrier (LCC), starting with Southwest Airlines in the US, followed by Ryanair and Easyjet in Europe. When they created the company strategy, the team
behind Southwest avoided copying what other airlines were doing. Instead, they adopted a bus company model, providing lower service standards compared to the other airlines by cutting free meals, drinks and hold luggage, and issuing simple paper tickets. Te plan was to create a product none of the full-service carriers would take →
busin e s s t r a ve lle r . c o m
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