18 June 2020: ERA has held an online meeting with members, plus representatives from DG COMP and DG MOVE as well academic experts to get views on how the COVID-19 pandemic has affected the competitive landscape in the air transport market and how the Commission could help level the playing field.

ERA Director General Montserrat Barriga welcomed members to this brainstorming session to identify issues and any work ERA needs to do. She outlined the current situation, whereby 20 out of 64 ERA airline members have had no activity at all for 3 months during the pandemic, whilst PSO routes, cargo and other vital links have been maintained. Relief measures have helped, however she noted that state aid has been unevenly spread. This will lead to market distortions and smaller airlines being forced out, causing a loss of connections and lack of consumer choice.

Barriga explained that ERA had been invited to a round table on 28 May to discuss recovery plans and the role of the EC at which she presented and pointed out that the key role of the EC was to create a more European, not a nationalistic approach. Following this meeting DG MOVE have invited ERA to be part of a working group looking at competition in the sector.

To give some background to the sitaution, the first presentation came from Juan Jesús García, Head of Industry Affairs, European Union, Amadeus IT Group and Emmanuel Mounier, Secretary General, eu travel tech on maintaining a competitive European air travel market after COVID-19.

The presentation aimed to demonstrate distortions in the marketplace. The presenters highlighted that the pandemic will impact across the whole supply chain, and for a long time, up to 2-3 years.

They evaulated the situation before COVID which was characterised by lots of consolidation, strong leverage of certain airlines at certain airports which limits consumer choice. The big 3 EU players recognise their own market position, and can dictate pricing and distribution channels. COVID state aid is likely to exacerbate this with an uneven spread, and with airlines in more fragile economies getting less support. There may also be conditions attached – eg. environmental, but not to protect connectivity and competition.

The presentrers then outlined why we need competition, in particular the impact on consumers; less competition means less direct connectivity. Full service carriers want to operate more profitable routes and are less inclined to connect to regional airports. This then impacts on the socio-economic development of the particular region. There are also problems with lack of transparency for consumers – larger carriers channelling people to direct distribution channels to avoid price comparison impacts smaller players.

In terms of protecting competition post-COVID, both upstream and downstream players should be considered. Financial support at EU level would level the playing field of state aid granted by member states. Ongoing regulatory reviews (eg. 1008/2008) provide a quick opportunity to reinforce competition and protect the single market. Also mentioned the possibility of introducing new PSO routes which would be open to all with fair competition.

Following this, Pere Suau-Sánchez from the Centre for Air Transport Management, Cranfield University summarised his paper: 'An early assessment of the impact of COVID-19 on air transport: Just another crisis or the end of aviation as we know it?'

For the paper, anonymous interviews were conducted with players across the industry, and Suau-Sánchez summarised the findings.

Regarding long-term consequences on the supply side, participants agreed that LCCs were most resilient, with FSCs seen as being the major losers because of long-haul activities which are likely to recover more slowly. Regional airports were seen as also likely to lose out, as capacity will be concentrated on certain markets. LCLH carriers were at particular risk, and there were also concerns about the position of regional airlines in supporting FSCs.

On the potential long-term changes in passenger behaviour, there were concerns about the recovery of business travel with the cancellation of MICE events and how companies will react. There may also be limited budgets for companies going forward, as well as a move to teleworking and the digital transformation of companies. Leisure segment recovery likely to be quicker, but there will be less disposable income, and leisure travellers may also have health concerns about air travel. Operational health and safety changes in airports will also lead to reduced capacity.

The possible long-term regulatory impacts were also discussed, such as the need for clarity on regulation such as CORSIA. Changes in the cargo sector were also predicted but unknown. Participants also identfied opportunities, such as the need to link airline strategy to broader social trends such as responsible consumption. On EU261 – a tension was recognised between short-term cashflow needs but potential for long-term reputational damage. Overall the need to improve reputation of the sector presented opportunities for airlines.

Following the presentations, members were invited to give their experiences, feedback and suggestions.

Airlines highlighted the unfairness in state aid. Airlines were facing many hidden cost increases and felt that smaller airlines were increasingly being asked to pay in advance – probably not the case with larger players. Some had received zero assistance – just furlough schemes and deferment of social security have been the only assistance received. They also had heard of support requests from smaller airlines being rejected due to finance concerns. 

There were also concerns on PSO routes with fixed price caps and EU261 refunds. There were also difficulties establishing interline agreements because of limited passenger numbers on thin regional routes.

Some felt that there had been preferential treatment of big players for state aid, and that there was a need to monitor carefully what other advantages larger carriers are getting as well as the amount of state aid.

The difference between US and Europe support was highlighted, and the limitations of current state aid instruments. The EC cannot force states to provide funding. Recovery plans should try and resolve asymmetries, whilst at the same time ensuring sustainability. There is a need for digitalisation to make the industry more flexible and reactive. Transport needs to be on the front line of the recovery plan

A representative from DG COMP brought the Commission's perspective. She pointed out that the EC doesn’t have powers to attach conditions for sustainability/social development etc. That is done by member states. The problem is that support is given by member states according to own priorities and finance constraints. She thanked ERA for the opportunity to listen to views of the industry and encouraged further feedback and ideas on what other measures could help the industry.