Travel and Tourism Support Pack
Case study D: Transportation
The Airline Industry – A Study of Growth and Change Background The world air transport market is very concentrated. Approximately half of the world’s fleet is operated by just 17 airlines (from around 650 worldwide) and approximately half of the available seat-kilometres flown by the scheduled airlines are on the top 6% of routes linking no more than 33 airports. The north American market is the world’s largest, accounting for 41% of the world’s total air traffic. In comparison, travel in Europe accounts for 8.5%. Of all passenger kilometres flown worldwide, approximately 57% are international and 9% are by charter travel. Deregulation Historically, the European airline industry has been highly regulated. The EU has introduced a series of liberalisation measures since 1987 that allows great freedom amongst EU airlines. There has been a significant development in the number of regional low-cost lines and routes, but the European market is distorted, as a number of state-owned or controlled airlines continue to benefit from state subsidies. New competitors are also likely to be hindered by slots and gate constraints at some airports. Large airlines, such as British Airways, have begun to rationalise their loss-making European routes by cutting destinations, using low-cost subsidiaries and franchising. Asia is the most regulated market and is dominated by national flag carriers. Domestic fares are strictly regulated but international fares are less so. The US, by contrast, has been deregulated since 1978 and it is a market-driven industry. Domestic traffic is almost completely deregulated (except for specific issues like safety), but international traffic is governed by constraining bilateral agreements. Alliances Airlines have to have a citizenship to maintain their operating rights, which makes intercontinental mergers impossible. Airlines therefore, have created alliances to capture...