Can airlines dictate their law to the states?
The tug-of-war has begun between Ryanair and the European states. The latter, seeing the steady growth in air passenger flows, and thinking they were giving assurances to ecologists, have all taken the path of taxing airlines. In their eyes, this has a double effect: firstly, to slow down traffic volumes, in particular aircraft movements, which are sources of pollution targeted by some voters, and above all to bring money into the public coffers, which badly need it. Taxing passengers is well regarded electorally because they are still in the minority compared to other voters, so why deprive oneself of a source of income that does not seem about to dry up.
But things are not that simple. First of all, the new taxes that companies will have to pay will be fully passed on to consumers, and they are seriously starting to complain. And the transporters have a ready-made solution: since the states do not like them, they simply leave. This is exactly what low-cost airlines are doing. The latter have played an essential role in maintaining the economies of regions neglected by industrial development. Their economies have transformed from manufacturing to services and tourism. And the “low costs” have found themselves in a position of strength in these areas because they have the only model that allows them to bring in consumers to replace declining populations.
Basically, these new entrants play a real role in regional development. So they are beginning not only to threaten to withdraw, but also to take action. This is what is happening in the countries of southern Europe. This is not necessarily going to suit governments. Indeed, the volume of expected levies is likely to be much lower than expected, as the adage “Too much tax kills taxes” appears to be confirmed. In addition, this withdrawal risks leading to a considerable loss for the tourist regions that live off the contribution of these operators’ customers.
On the other hand, these same airlines, encouraged by continued growth and an efficient business model, have ordered a considerable number of new aircraft from the major manufacturers. The only five largest European “low-cost” operators, Ryanair, easyJet, Wizz Air, Vueling and Pegasus, have 1,354 aircraft and 983 on order. Opposite them, the three major groups, Lufthansa Group, Air France/KLM and IAG, certainly have 2,065 aircraft, but only 425 on order. However, all “low-cost” aircraft are short-to-medium-haul, while those of the major traditional operators are mainly used for long-haul flights. That is to say that the “low cost” carriers now hold power over European services, and this will probably be strengthened in the future.
Admittedly, geographically speaking, Europe is a small continent on which surface routes can become fierce competitors to air transport. High-speed rail lines have become very important, and the coaches of large private operators are crisscrossing the motorways and offering fares that even the most efficient “low-cost” operators cannot bear. Does this mean that European states will be able to do without their services if they decide to close ports of call, as they intend to do if governments do not reverse their taxation decisions? This is something that deserves reflection.
The balance of power between the public authorities and the airline operators is fairly even, and governments have no interest in seeing the very serious network of air services, patiently built up by the “low-cost” operators, shrink. The construction of a new motorway or a new high-speed railway is now facing fierce opposition from environmentalists, who will soon no longer have air transport to sink their teeth into. Admittedly, some air operators such as Ryanair have sometimes shown reprehensible behaviour, which is sanctioned by the courts in many countries. They will also have to improve both their social relations and their links with customers. They will have to comply with the compensation rules imposed by the European authorities. But for all that, states must not consider them enemies.
It is time for governments and operators to learn to talk to each other to provide the best service to the population.
