Archive for November, 2007

Competition law: Arriving now for aviation

In the last ten years there have been two clear trends in competition law as it applies to all parts of aviation: there has been more of it; and aviation has been slow to realise it. The wake up call should have been the steady dismantling of the IATA competition immunities, under which not only the IATA Conferences that agree tariffs but also interairline services and the relationship with agents, have had, and now are about to lose, definitively anti-trust immunities. It has happened slowly, so perhaps people did not notice. There has also been a steady growth in the number of competition law agencies around the world.

For many years, on the strength of the unique position IATA enjoyed, aviation generally (not just airlines, but airports, maintenance providers and others) have not given this fundamental part of modern law the attention that it perhaps deserves. Those days are over.

Part of the problem has been the difficulty (common to all service industries) of proving the price of a seat, or a passenger to be boarded, so that it is then possible to assess whether such a price is predatory, or the behaviour is otherwise anti-competitive. These issues are hard, but not insurmountable. Nor are they exclusive to the aviation industry – all service industries have had to face this point. But as all parts of the aviation industry now mature, normal market assessment can be brought to bear – if only the members of the airline industry realise it.

There are three current examples: in the maintenance area, the OEMs (original equipment manufacturers) are now entering into ‘airframe by the hour’ arrangements similar to the arrangements engine manufacturers have in place, while at the same time airlines are starting to push for a more widespread use of certified spare parts not manufactured by the OEM; in the air traffic control area, whilst the Air Navigation Service Providers (ANSPs) are debating how far and how fast to privatise, some ANSPs are starting to enter into commercial arrangements. For example, some are starting to sell the data that chart makers have relied on. Some are even now starting to also sell not the data but value added services; and in the airport sector, debate continues on a new EU Directive that aims to regulate airports that behave in an anti-competitive manner.

In all three cases above, there are incumbents with a substantial degree of market power – itself the first alarm bell that should be ringing for them. For those looking to compete with such big players, and to present competitive options, it will well reward a review of competition theory and practice. For incumbents in the industry, there is now a need to keep not just an eye on the competition, but the competition authorities as well, For new entrants, there is a marriage of convenience between themselves and the regulators – at least for the moment.

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