Open skies

Liberalisation and globalisation make the aviation market increasingly competitive and require airlines to undertake large restructuring efforts. Significant international airline mergers started with Air France/KLM in 2004 under the liberalisation of the EU aviation market.

Competition analysis

Competition authorities typically identify overlapping markets, determine whether the merged entity would enjoy market power on those markets, assess anticompetitive effects and/or efficiencies that would stem from the aviation merger.

Remedies

Aviation merger remedies are often influenced by the fact that mergers are the most integrated and long-lasting form of airline consolidation, as opposed to alliances. In the context of aviation mergers, competition authorities tend to adopt structural remedies, especially slot, route and gate divestitures (at congested airports), to address anticompetitive risks 

Distinctive role

The transport sector plays a special role in the context of competition law. In scheduled air traffic in particular, the costs of an airline consist predominantly of fixed costs, which makes financial planning particularly difficult for airlines. For this reason, state aid has always been part of the economic framework of the aviation industry.

Control by the European Commission

State aid in the aviation industry usually has to be notified to and approved by the European Commission. Therefore, in addition to its competence in competition law, the Commission plays a special role in the competitive framework of the European aviation industry.

Change due to COVID-19

Due to the flight restrictions triggered by COVID-19, massive subsidies for airlines were and are necessary. This not only raises questions of state aid law in the European aviation industry, but also concerns issues of global competition and its underlying principles.

Competition issues related to distribution in the aviation industry

Computerised Reservation Systems (CRS) are used for hosting airline seat inventory and seat reservation transactions. Originally developed, owned and operated by airlines, the use of CRS had been extended to travel agents as a major distribution tool.

CRS have a dominant position in the travel industry. Barriers to entry are high but the disintermediation of the CRS is starting to happen with the increase in direct sales by airlines and online travel agents.

The CRS sector is highly concentrated and airline customers have little negotiating power. CRS providers impose terms on airlines and agents, ensuring that each travel agent is locked into a single CRS. Therefore, CRS often restrict competition in breach of article 101 or 102 TFEU.

Market definition in the aviation industry

The first step in any competition analysis is the definition of the relevant market. A relevant market is defined according to both product and geographic factors. Thus, when examining aviation markets, market definition is crucial.

Like no other industry, the aviation sector consists of multiple markets that often reflect the complex interaction between the different stakeholders. However, the major market in aviation is the 'market for scheduled passenger air transport services'.

In principal, relevant markets are defined on a case-by-case basis. However, the definition of a relevant aviation market by a case-by-case analysis is usually more complex than in any other industry.