PricingPricing in the Aviation IndustryIndustries

The aviation industry is a strategically important sector that makes a vital contribution to the EU’s overall economy and employment; aviation supports close to five million jobs and contributes 300 billion EUR or 2.1 percent to the gross domestic product of the EU. Since the EU’s Internal Market for Aviation was born back in 1992, there has been a revolution in air travel. Today, air travel is cheaper, safer and open to more people than ever before. What’s more, because of a comprehensive set of EU passenger rights, travellers can have full confidence they will be looked after on their journey. This is all thanks in no small part to an EU initiative to replace a series of national rules by a single set of EU rules, known as the EU Internal Market for Aviation. Competition brought major changes to air travel—changes that have propelled European mobility forward, successfully helping to bring Europeans closer together and providing solid foundations for more jobs and a growing economy. The idea of travelling and experiencing new places and cultures has become a reality for many people in Europe during the past 25 years. More routes and more connectivity also give a boost to the economy. In 2014, for example, aviation supported 8.8 million jobs in the EU and contributed over 621 billion EUR to EU GDP. However, aviation is also important for the success of SMEs and tourism. One EUR spent in the aviation sector generates 3 EUR for the overall economy; and for every new job in aviation, three more are created elsewhere. EU rules also ensure that aviation workers are treated fairly. In addition, the number and quality of air connections can play a decisive role in the location choice of large firms’ headquarters. In December 2015, the European Commission adopted an Aviation Strategy for Europe, a milestone initiative to boost Europe’s economy, strengthen its industrial base and reinforce its global leadership position. A strong and outward-looking aviation sector will benefit not only businesses but also European citizens by offering more connections to the rest of the world at lower prices. The aviation market was gradually liberalized through three successive packages of measures adopted at EU level which covered air carrier licensing, market access and fares. So, decades of restrictions that had limited air transport markets in Europe and prevented cross-border investment by European airlines have been removed. The gradual development of a more coordinated EU external aviation policy over the past decade has been the logical consequence of the creation of the EU internal market and associated common rules. This has generated significant economic benefits. But the Commission has now come with fresh ideas to move forward. Something needs to be done about the heavy airspace congestion causing lengthy delays on many European flights and the strain on airport capacity due to the projected increase in traffic. This is the aim of the ambitious initiative for a Single European Sky (SES), launched in 2004. A second package of measures, known as SES II, followed in 2009 and had a greater emphasis on environment and cost-efficiency. We are now looking at whether further measures are necessary. The technology required for the future Single European Sky is provided through the air traffic management research programme SESAR, which aims to modernize infrastructure and raise efficiency by optimizing capacity, enabling the SES to become a reality. In 2018, the Lufthansa Group was the biggest player with US$ 42.18 billion revenues, followed by Air France KLM (US$ 31.2 billion) and the International Airlines Group (US$ 28.72 billion) as shown in Fig. 13.1 (Statista 2020).