WRITTEN QUESTION E-0517/02

by Erik Meijer (GUE/NGL) to the Commission

(28 February 2002)

Subject: Use of predatory pricing by new entrants to the market to force out established airlines, and the adverse impact on passengers, employees and the environment

1. Can the Commission confirm that, although the number of air passengers has fallen since 11 September 2001, after years of growth, and although old, established airlines such as Sabena and Swissair have collapsed, new smaller airlines such as Virgin, Easyjet and Ryanair are taking over a growing share of the market by starting up new scheduled services, taking over part of the rights of airlines which have ceased to operate and buying new aircraft on a large scale?

2. Can the Commission confirm that Ryanair, which intends to increase the size of its fleet fourfold by buying 150 Boeing 737-800s and, inter alia, to introduce a new service between London and Eindhoven, is now the most profitable airline in Europe? How can these large profits at a time of generally declining profitability be explained?

3. What implications does the combination of low fares and rapid expansion have for safety, quality, continuity of service, the environment and employees? At the expense of what desirable objectives are practitioners of predatory pricing and low-cost carriers able to provide services so cheaply in comparison with other airlines?

4. Does the Commission anticipate new types of crisis in aviation if practitioners of predatory pricing come to dominate, old airlines go bankrupt and international transport collapses on account of instability and excessive risks?

5. Will the Commission take measures to secure the introduction of minimum fares to make it impossible to cut fares to predatory levels and to ensure that they do not fall so low that environmental and safety standards cannot reasonably be maintained?

Source: De Volkskrant newspaper, 25 January 2002

Answer given by Ms de Palacio on behalf of the Commission

(12 April 2002)

1. Although the beginnings of a recession in air transport were already being felt in the first half of 2001, it is true that air traffic has fallen markedly since 11 September 2001. However, the emergence and expansion of so-called low-cost carriers is a phenomenon that largely predates this. These airlines apply an economic and commercial model which consists in keeping operating costs to a minimum and passing on these savings to passengers through low fares. These airlines are generally proving more resistant than traditional airlines to the current crisis in air transport following the terrorist attacks of September 2001, partly because these low-cost carriers do not operate on long-haul routes, in particular on transatlantic routes, and partly because they tend to offer only economy class.

2. It is true that Ryanair is one of Europe's most profitable airlines, and has been for several years, for the reasons mentioned above.

3. The Commission is not aware of any data showing that the fact that these airlines are able to expand rapidly and offer low fares is because they do it at the expense of safety or the environment. In fact, low-cost carriers are able to save on costs mainly by adapting the range of services they offer and by systematically opting for the cheapest operating modes. As regards the environment, low-cost carriers generally operate modern aircraft, in order to cut costs, as they are usually less noisy and use less fuel than older aircraft. As regards safety, all European airlines must comply with the same standards, and the Commission is not aware of any information showing that low-cost carriers present deficiencies in this field. On the social front, low-cost carriers expect their employees to be more productive than the average for the sector, but they must still comply with the social legislation applicable in the Member States or at Community level. In any event, the Commission is not aware of any infringement of Community law in this area.

4. A number of companies had experienced a deterioration of their profitability prior to 11 September 2001. As the Commission indicated in its communication of 10 October 2001 on the repercussions of the terrorist attacks in the United States on the air transport industry(1), the difficulties encountered by the traditional airlines are structural in nature: they are mainly due to an excess supply and a certain discrepancy between the kind of services on offer and market demand. In addition, the ownership and control rules contained in the bilateral agreements between the Member States and third countries are an obstacle to the necessary restructuring of the industry. This is why the Commission is trying to create the conditions to enable the industry to undergo an in-depth restructuring.

5. The Commission already has a legal instrument at its disposal in the form of Council Regulation (EEC) No 2409/92 of 23 July 1992 on fares and rates for air services(2), which safeguards against excessive unexpected increases or decreases in air fares. This instrument has not yet been used as, to date, no complaints have been referred to the Commission. On account, in particular, of the above reasons, the Commission does not intend to introduce measures to impose minimum fares at the present stage.

(1) COM(2001) 574 final.

(2) OJ L 240, 24.8.1992.