IAG suffers from European Commission red tape

Victoria
By Victoria March 13, 2012 22:29

IAG suffers from European Commission red tape

The more we move through this period of uncertainty and high fuel costs the more the European market looks to be in a no-hope position of airlines being taxed to death whilst not being able to become large enough to compete with the emerging super carriers of the globe. Indeed there is a growing argument that EU-based airlines should re-domicile for taxation and legislation purposes. If it were any other business type then re-location to avoid over taxation would be a first thought of directors, alas aviation remains a politicised industry. However as we see globalisation of the aviation industry gather pace it can be argued that airlines could and should look to shifting their domicile to suit. These options should be further explored by airlines across Europe, especially if airlines outside of the EU manage to get around having to be a part of the ETS. The ETS trade row is gathering pace and although Airbus stands to lose the most in this situation, European airlines could yet see themselves caught in the trade war cross fire as they try for JVs, mergers and approval of the same.

Today, airlines based within the UK seem to have it worst of all. They have terrible problems with airport capacity where it matters most at Heathrow and they have suffered successive governments that see aviation as a frivolity that can be taxed at will.

So it is that IAG finds itself in the centre of a bureaucratic nightmare and now faces a lengthy competition investigation into its takeover of BMI British Midland after being told by the European Commission that its proposed concessions, which include selling off some Heathrow slots, are unlikely to address its full range of competition concerns. In the first instance Commission officials will seek feedback from rival airlines and Virgin Atlantic has already been very outspoken about the deal, they are likely to try and rally support from others to back their view.

I cannot help but think that Virgin Atlantic is a little bitter on this issue. Slots at Heathrow are gold dust, due to years of under development at the airport thanks to UK government neglect and political weakness on the issue of aviation expansion. BA is based at Heathrow, if it has the will and the funds to solidify its position through the purchase of slots then why should it not be able to do so? Virgin argues that BA would have too much sway at Heathrow – This might be true, but it is not the fault of BA. BA is just trying to expand in the only way that is open to them, by purchasing slots wherever possible. Why should BA not be allowed to grow at the same pace as all other airlines it competes against that are not saddled with being based at Heathrow?

As for Sir Richard Branson’s claims that if regulators allow the deal, travellers could face higher fares when flying from Scotland and north-west England to London’s main ¬airport. Well this is total tosh…BMI went down the pan because it was flying too few people too cheaply. The fares need to increase, not only because of additional UK taxation coming into effect but also because the tickets are simply too cheap – If Virgin Atlantic and their backers Etihad had won the BMI deal then they would have taken a sword to regional routes – You can be sure of that.

I hope that the EC will see sense but I fear that its record to date on all matters aviation is so poor that IAG will be held back. In that instance and with no additional capacity coming to Heathrow any time in the next decade and BA will have to look at a second base in a central location to their network ambitions. The future for growth at IAG remains code shares via the Oneworld alliance, so in the future what is preventing a Oneworld alliance hub being formed in a location that is beneficial to the alliance members? One wonders if in fifty years such aviation hubs will rise out of the desert in globally central locations.

Victoria
By Victoria March 13, 2012 22:29
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