Regulatory Changes and Aviation Market Development

Regulatory Changes
and Aviation Market
Development

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
(1) Outline regulatory environment in EU.............................................................................3
(2) Outline Regulatory environment in Asia..........................................................................5
(3) Outline Regulatory environment in Middle East..............................................................6
(4) Compare and contrast the differences within these three regions on the following.........7
CONCLUSION................................................................................................................................9
REFERNCES.................................................................................................................................10

INTRODUCTION
The liberalisation gave birth to new airline industry accompanied by effective business model as
well as competitive strategies. The last few decades caused many regulatory changes in the
aviation industry. One of its part is the deregulation which helped the airline industry to sustain
keeping in view the changing environment (Harvey, Turnbull and Wintersberger, 2019). The
effective strategies need to be formulated in this field as the aviation sector contributes towards
economy. The deregulation abolished various restrictions over the airlines so that the industry
works effectively and efficiently. As the restrictions was creating barrier in the sector to fly
freely across different regions. It further introduces free market for new entrants in airline and
even focused towards commerce and trade (Trimarchi, 2017). The report outlines various
aviation regulatory changes accompanied by the emergence of new business models and
competitive strategies.
MAIN BODY
(1) Outline regulatory environment in EU
In aviation industry the low-price competition are threating the sustainability of the
traditional market leaders. The main aim of the low-price firms is to erode profit margins
accompanied by an increase in market share. The Low-Cost carrier is one of the example of
aviation industry (Baldwin, 2017). The airline passenger has witnessed the growing price
competition in this industry. The intensified competition is led by initiatives in respect of
policy deregulation until the concept of cost airlines are not emerged. Europe Low-Cost
airlines have changed the way of travelling and further construed the direct services between
city pairs which earlier used to lack (Oxford Analytica, 2017).
Deregulation of the European aviation market
Many significant changes were evolved in air transport industry of Europe. The end of
single market in air transport industry is the main reason of such changes. One of the
significant change is the emergence of Low-Cost Airline (LCA). The main reason behind its
pace of free and fair competition in European Airline is the deregulation in European Union
Aviation Industry.

One of the Characteristics of European aviation was its barrier entry, price collusion and
capacity sharing. The airline used to charge high fairs as compared to standards adhered by
world (Palcic and Reeves, 2021).
Prior to deregulation the route was very expensive because of high fair charges. The
traditional airlines in Europe used to serve on particular cities which was mainly the capitals
of European countries. As the reason was the concept of one airline of one country is
designated for a given loot. For example for London-Paris route two airlines that is British
Airways and Air France was designated to serve this route.
Later the changes in regulation were made through two ways-
 Renegotiation of Bilateral Air Service Agreement between Countries- The new Air
Service Agreement was negotiated between U.K. & Netherlands which was later
followed European countries. This negotiation led positive attribute towards
liberalisation (Ivanova, 2017). The key aspect of this agreement was right to free
entry of new entrance, free access to airline and elimination of control and double
region.
 Introduction of Liberalisation packages:- The first package was adopted in
December 1987, which led introduction of new fares along with Fifth Freedom
Rights. The second package was approved in June 1990 which facilitated the Right
of airline to carry unlimited passengers and cargo between countries. The third
package led significant change as it removed the remaining regulation constraints on
Intra EU air-transport.
The Three Liberalisation packages resulted in the deregulation air passenger services
in Europe (Halpern and Graham, 2018). As the traditional flag carrier continued to
charge high fare for European routes while individual countries focused to liberalise
their domestic airline industries. On the other hand European was still under dominance
of state own carriers due to monopoly control of government. Europe established Low-
Cost Airline and targeted the Irish by offering traditional services at low fares. The most
important outcome of liberalisation is the remarkable growth of Low-Cost Airline. It was
considered as the pioneer business model which was adopted by many carriers including
American and European carriers.