Posts Tagged ‘europe’

An item of interest from the Guardian:

According to the researchers, people who regularly recycle rubbish and save energy at home are also the most likely to take frequent long-haul flights abroad. The carbon emissions from such flights can swamp the green savings made at home, the researchers claim.

Stewart Barr, of Exeter University, who led the research, said: “Green living is largely something of a myth. There is this middle class environmentalism where being green is part of the desired image. But another part of the desired image is to fly off skiing twice a year. And the carbon savings they make by not driving their kids to school will be obliterated by the pollution from their flights.”

Some people even said they deserved such flights as a reward for their green efforts, he added.

Only a very small number of citizens matched their eco-friendly behaviour at home by refusing to fly abroad, Barr told a climate change conference at Exeter University yesterday.

The research team questioned 200 people on their environmental attitudes and split them into three groups, based on a commitment to green living.

They found the longest and the most frequent flights were taken by those who were most aware of environmental issues, including the threat posed by climate change.

Questioned on their heavy use of flying, one respondent said: “I recycle 100% of what I can, there’s not one piece of paper goes in my bin, so that makes me feel less guilty about flying as much as I do.”

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No sooner do I say that the BAA case will be a hot topic this fall on yesterday’s Things with Wings Radio Show (thanks, Benet!) than BAA beats the Competition Commission to the punch and puts London’s Gatwick Airport up for sale. According to BAA’s chief, quoted in the Financial Times, “We have decided to begin the process of selling Gatwick Airport immediately. . . . Gatwick has long been an important and valuable part of BAA and the decision to sell was not taken lightly. We believe the airport’s customers, staff and business will benefit from the earliest possible resolution of current uncertainty.” This comes after the Competition Commission’s provisional findings indicated that it would order BAA to sell off two London airports and either Edinburgh or Glasgow in early 2009. (See my posts on the provisional findings here and here.)

According to the International Herald Tribune, BAA will continue to contend for keeping Stansted Airport — “At Stansted, we believe that a change of ownership would interfere with the process of securing planning approval for a second runway, which remains a key feature of government air transport policy” — and its three Scotland airports.

The Competition Commission released a statement today indicating that between now and its 2009 final report, it will “take account of any action by BAA in the meantime which may impact the competition problems we have provisionally identified.” Will the Gatwick sale delay the commission’s final recommendations, or will it come quickly enough to send signals about competition in the new London airport market?

And now comes the fun part: airport operators have been circling Gatwick for weeks now, planning their bids for whenever BAA was forced to relinquish the airport. Potential buyers include the Australian infrasturcture giant Macquarie Group, Manchester Airport Group (which owns Manchester Airport in England), Hochtief (which operates and owns shares in several European airports), Singapore’s Changi Airports International, and Fraport (which runs Frankfurt International Airport). The most interesting entry in the mix is Richard Branson, involved through either Virgin Atlantic or the umbrella Virgin Group (news reports are unclear). Virgin has expressed interest in joining a consortium to bid on Gatwick. With this cast involved, the sale of Gatwick may be one of the highest-profile airport deals ever.

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I’ve been digesting the UK Competition Commission’s provisional findings on BAA, and I’ll have more to say on the proposed remedies later. Here, in summary form, is what the Commission has found.

BAA was privatized with control of London’s three main airports in 1987 primarily to increase airport efficiency and provide a solid financial base for future expansion. It has not done this. “More than 20 years later, there is inadequate capacity, particularly runway capacity, in the South-East.” Furthermore, BAA’s airports are widely criticized by airlines, travelers, and other stakeholders. The Commission acknowledges that BAA is not entirely to blame — they do not oversee air traffic control, immigration and HM Customs, or airline operations. But BAA is not blameless. They are unresponsive to “the interests of airlines and passengers,” reports the Commission.

Is the lack of competition between BAA’s airports inevitable? Evidence suggests not. The Commission points out strong competition between Belfast’s airports, Birmingham and East Midlands, Cardiff and Bristol, and Liverpool-Manchester-Leeds Bradford. And BAA’s airports are easily substitutable, especially for leisure travelers — there is no natural monopoly in airport services in the Capital or Edinburgh-Glasgow as there is in, say, Aberdeen (where BAA ownership has been OK’d by the Commission).

BAA argues that competition is restricted not by common ownership but by capacity constraints. The Commission agrees, and it also fingers three other culprits in capacity constraints: the planning process, which slows up capacity development; government policy, which shapes future runway investments; and price regulation of airports. But this, the Commission argues, does not absolve BAA: “We acknowledge that to some extent BAA’s actions can be attributed to Government policy and/or the planning system and we have noted the interdependences between them. But in our view, as the owner and operator of the three major airports in the London area, BAA has to be regarded as responsible for their achievements and shortcomings.”

Because of capacity constraints, even if BAA were broken up today, there would be limited competition between airports in the short run. But the Competition found that “under separate ownership . . . we would expect the market structure to be sufficiently competitive so as to incentivize airport operators to overcome the current constraints on expanding capacity and to expand capacity to facilitate competition with one another, increasing competition in the longer term.” In other words, even though external forces impede airport expansion, BAA had little reason to seek out competitive expansion.

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The Competition Commission has published its provisional findings. Key passage:

Our provisional view therefore is that a number of features each give rise to an AEC:

(a) As regards common ownership:

(i) Common ownership of Edinburgh and Glasgow is a feature which prevents competition between them.

(ii) Common ownership of the three BAA London airports is a feature of the market which prevents competition between them; the effectiveness of competition between them absent common ownership is likely to increase in the longer term, with the increased incentive to invest, although we also see some scope for competition between them in the short-term despite existing capacity constraints.

(iii) However, Heathrow’s position as the only significant hub airport in the South-East and indeed the UK is a feature which restricts competition between airports for some airlines.

(iv) Common ownership of Southampton and both Heathrow and Gatwick is a feature of the market which prevents competition between them, as shown in particular by the lack of responsiveness of BAA to developing Southampton to satisfy the requirements of its airline customers.

(v) Common ownership of the BAA London airports further restricts competition between airports through its effects on capacity constraints; and exacerbates the inadequacies of the regulatory system, reducing the benefit of regulation, distorting competition between airlines.

(b) Aberdeen’s comparatively isolated geographical position and other factors that make it unattractive to serve a catchment of Aberdeen’s size with more than one airport are features preventing competition to Aberdeen.

(c) Aspects of planning restrictions are features which restrict competition by contributing to the current capacity constraints at the BAA London airports.

(d) Aspects of Government policy restrict or distort competition by contributing to the current capacity constraints at the BAA London airports.

(e) The current system of regulation of airports is also a feature which distorts competition between airlines.

Much more commentary on this not unsurprising decision coming soon.

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Last week, the Financial Times carried an editorial on expanding “open skies” between the U.S. and Europe. After heralding the decline of flag carriers (even more marked with the proposed merger of BA and Iberia), the editors write: “Governments . . . must deal with the remaining obstacles to effective global airline consolidation.”

The US once led the way in deregulating air travel. However, the first European Union-US “open skies” agreement, which came into force in March, showed the Europeans are now keener to open up air traffic. The deal gave US carriers the right to operate flights between EU member states — but the US denied European operators access to its domestic market. After a slow start, Europe can reasonably claim it is now the leading advocate for a freer air-travel industry.

The current open skies negotiations’ top issue is whether the U.S. will allow foreigners to own more than 25 percent of voting stock in U.S. airlines, the quota that nearly scuttled Virgin America. According to the FT,

These absurd anachronisms must be abolished as soon as possible. Removing restrictions on cross-border ownership would pave the way for mergers between US and European carriers. Since the US and the EU dominate the airline industry, it would encourage other countries and regions to abolish their restrictions. Consolidating large airlines adds to their networks and allows significant economies of scale. Confining international operators to operating largely from one continent is ridiculous.

Americans discovered in the 1970s that confining airlines to certain regions or routes was also ridiculous. But what are the obstacles today to opening our airlines to foreign investment and our domestic routes to cabotage (i.e., allowing foreign carriers to operate domestically)? First, U.S. airlines fear competition from rivals that may still enjoy state subsidies or are simply better airlines. There’s no reason to shield them from competition; protectionism is both economically and politically retrograde. Second, small communities fear losing service. What incentive, they say, would Lufthansa have to maintain service to Hibbing, Minn.? Well, Northwest doesn’t have much of an incentive either, apart from a subsidy, so that’s a non-issue. Third, some fear that the U.S. will not be able to exercise sufficient safety oversight over foreign airlines. The solution here is to ensure that the parallel safety institutions in open skies partner countries are equal in quality to the FAA and that all parties are subject to ICAO standards. Furthermore, if we already trust an airline to operate at U.S. airports and over U.S. airspace, there is no reason to block it from a domestic flight. The fourth concern is labor. China is preparing to ramp up its pilot training program to meet domestic needs, but what if a U.S. airline could pump in cheap laborers domiciled in, say, China, who commute to the U.S. to work? At the moment, however, that’s not the situation we’re in. China is instead hiring hundreds of pilots from overseas, as are Middle Eastern, African, and other airlines. The U.S. has become a talent pool for airline pilots. In fact, allowing European cabotage might actually increase the U.S. pilot base, should European airlines wish to take advantage of lower relative labor costs.

Should we expect any tectonic shifts at the open skies negotations?

However, despite acute domestic problems, it is the US government that is standing in the way of a new deal on foreign ownership. Banning foreign takeovers may win populist acclaim, but American consumers should not thank their politicians for shielding their airlines from help from abroad.

Borders in the sky [FT]

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The Dutch “green tax” on aviation, which I’ve blogged about here and here, is already negatively affecting Amsterdam’s Schiphol Airport, according to a report:

Some 50,000 fewer passengers are expected to use Amsterdam Schiphol airport, one of Europe’s busiest, this summer on account of a Dutch environmental tax on flights, it was reported Saturday.

“We’re expected zero growth in 2008, and in fact a decrease (in passenger numbers) in July and August,” an airport spokesman was quoted as saying by the domestic ANP news agency.

Tax means fewer travellers at main Dutch airport: report [AFP/Breitbart]

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News came out today that the U.S. embassy in London has responded harshly to plans by HM Treasury to change the Air Passenger Duty into a per-plane tax at great expense to airlines and, ultimately, travelers. Air Passenger Duty was last raised dramatically in 2006 as an anti-climate change measure. Then-chancellor (and current prime minister) Gordon Brown said that APD was only a temporary solution to restraining aviation’s climate impacts until the sectors scheduled 2010 inclusion in the European emissions trading scheme. Airlines were starkly opposed, claiming that it was merely a revenue grab, and environmental campaigners dismissed its “green” credentials.

The current plan, outlined in a consultation document [PDF] released earlier this year, is to change the per-passenger charge into a per-plane charge based on maximum takeoff weight as a factor of three distance ranges: the European Economic Area, less than 3,000 miles from London (non-EEA), and more than 3,000 miles from London. The argument is that a given plane produces the same emissions whether it is fully loaded with APD-paying travelers or just half-full. The current £40 APD for economy-class long-haul travelers could climb as high as £100, according to the Daily Telegraph — which might severely affect traffic at British airports, especially connecting flights through London’s Heathrow Airport. Indeed, the Treasury acknowledges this in its consultation: “London Heathrow airport has the highest number of international transfer passengers of any airport in the world; transfer traffic there represents 34 per cent of all passenger traffic. Some airlines argue that the knock-on impact of aviation duty would reduce UK transfer traffic by imposing an effective cost on the provision of transfer traffic; and that this would have negative consequences for the UK economy, including through a reduction in the frequency and variety of services that can be offered directly from London.” This exposes one of the major obstacles facing those who would implement regional “green” taxes: competition.


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