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Is Eurocontrol at risk of creating a new monopoly?

As we discussed in this month’s Aviation Intelligence Reporter, the European Commission is struggling to find an alternative supplier to Eurocontrol to support the Performance Review Board in its activities. Ironically, Eurocontrol may soon be facing the same type of problem itself. Eurocontrol has invited ANSPs to form consortia and submit bids to be the provider of each of the nine services identified under its Centralised Services initiative. The successful bidder for each of the services will operate on a pan-European basis to all 41 Eurocontrol members. It will therefore have a monopoly on the provision of that service across Europe, at least for the duration of its contract This approach has been adopted in other sectors, notably railways where companies compete for exclusive franchises to operate particular routes. It is intended to obtain the benefits of competition in industries where the infrastructure means it is not considered practical to have multiple providers of the same service. In theory, the tendering process should result in the services being provided at a competitive cost and quality. However, it does come with risks. As any traveller on the UK’s trains will warn you, the service provider may need close monitoring to ensure that quality is not compromised by their incentives to make a profit. In the more long-term, there is a real risk that the tendering process may limit competition. Potential competitors, who are by definition locked out of the market for the duration of the contract, may struggle to compete with incumbents when the contracts come up for renewal. These potential competitors often lack the knowledge, experience and relationships that come from having previously operated the contract. One way to address this is to geographically separate the services that Eurocontrol is tendering. For example, each of the nine services could be split into for three or four different regions (or even by FAB) rather than having a single pan-European service. This would provide opportunities for multiple operators to become experts in each area. While this approach may result in some efficiency losses where there are economies of scale, these losses may be outweighed by the long-term benefits of greater competition. Have you any ideas on how Eurocontrol can ensure that the tendering process for its centralised services delivers long-term value for money?

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