Association of European Airlines
- Daily Departures
The Association of European Airlines (AEA) brings together over 30 major airlines, representing the voice of the European full service airline sector for over 50 years. AEA works in partnership with the institutions of the European Union and other stakeholders in the value chain, “to ensure the sustainable growth of the European airline industry in a global context.
AEA provides its members support by following all aeropolitical issues, analysing their impact, recommending strategies, networking with all relevant stakeholders and influencing the legislative process. It also maintains extensive data and economics publishing activities.
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Following two conspicuous airline defections from regional airline associations in 2015 there must be questions about the role of industry bodies in future – Delta left A4A and IAG left AEA. The issue is further complicated when a European, cross-association grouping is set up to achieve a special purpose.
Whereas Delta's departure from A4A was over fees and ATC privatisation, IAG left AEA on broader policy grounds in a disagreement over liberalisation versus protectionism. IAG then became a member of ELFAA, previously the stronghold of LCCs. Adding further to the density of the manoeuvres, IAG then joined Air France-KLM, Lufthansa, easyJet and Ryanair in forming a new body, A4E, with a very focused agenda.
CAPA's Airlines in Transition (AIT) event in Dublin in Mar-2016 assembled a panel bringing together the heads of four of Europe's airline bodies (AEA, A4A, ELFAA and ERA), the head of its airport trade body (ACI Europe) and the experienced head of the Arab Air Carriers Organisation. Moderated by Kurt Knackstedt, President of the Association of Corporate Travel Executives, the panel addressed the relevance and future of these associations.
Europe has yet another airline trade body. It has been formed by Europe's three biggest legacy airline groups (Air France-KLM, IAG, Lufthansa Group) and its two largest LCCs (easyJet and Ryanair) to lobby European governments and regulators on airport charges, air traffic control issues and passenger taxes.
The six existing "airspace user associations" have already demonstrated unity on these matters through joint responses to the EU Aviation Strategy in Dec-2015 and Jan-2016. This leaves questions over the founding members' view of the new body's role relative to the old associations. Designed to increase the perception of industry unity, it avoids matters on which its founding members disagree, notably competition from Gulf airlines. Moreover, it has drawn a hostile response from the European airports' trade body, further highlighting divisions in aviation.
It is difficult to avoid the feeling that the new association changes little. Even its name lacks originality: Airlines for Europe, inevitably abbreviated for the digital age to A4E, is just an adaptation of Airlines for America. A4E will hope that A4A's loss of a key member (Delta) in 2015 is not a glimpse of its own future.
Jumping from specialist media and the business pages, Air France's struggle to restore profits by confronting industrial relations issues has received the attention of global mainstream media. Images of Air France managers stripped of the shirts have been seen across the world.
Air France failed to agree with flight crew unions on improved labour productivity by its self-imposed deadline of 30-Sep-2015. As a result, it decided to implement its alternative plan of cutting back on long haul operations and staff numbers. Although the employees that attacked management presenting the plan to the Works Council may not be fully representative of the Air France workforce, the episode holds up a mirror to both labour and management.
The mirror is cracked and Air France has had seven years of losses. It does not report separate results, but CAPA has pieced together an analysis of Air France's financial performance since the KLM merger in 2004. Its margins have been below KLM's throughout and also lag other European airlines. At the heart of its problem is low labour productivity. Improvements in this area will be vital to a sustainable future for Air France.
Aviation in Europe has a PR problem, which is not helped by the fragmentation of industry representation. Efforts to consolidate representation have so far not yielded material results. Europe's five largest airlines are now attempting to seek common ground, prompted by the European Commission's consultation on a new aviation policy. However, they are avoiding obvious sticking points such as protectionism with regard to competition from Gulf-based airlines. By contrast, airport representation is unified in ACI Europe, which has also responded to the Commission with a liberal set of policy proposals.
Recent changes in the membership of Europe's main airline representative bodies have seen ELFAA become its biggest airline association, measured by its members' passenger numbers, ending the previous hegemony of AEA. IAG's legacy airlines defected from AEA to ELFAA due to differences of opinion over market liberalisation.
There has never been a greater need for a single voice on issues such as taxation and the infrastructure provision (both on the ground and in the air). Aviation needs to argue its case and more effectively promote its benefits to the public.
Ryanair CEO Michael O’Leary’s recent musings about a possible low-cost transatlantic project indicate that he believes any such operation would need average fares below EUR100.
This raises the question of just what is a sustainable fare in this market?
Until recently the exclusive preserve of legacy full service carriers, the North Atlantic has seen the entry of LCC Norwegian over the past year.
However, it was always possible to find relatively low fares and Norwegian’s pricing, while lower than that of premium airlines such as British Airways, does not appear to be substantially lower than the average all-inclusive economy fare of Association of European Airlines (AEA) member airlines between Europe and North America.
This report explores some of the key factors in establishing viable pricing for this model.
European airlines face overcapacity & resurgent labour. Recent profit warnings make alarm bells ring
A recent bout of profit warnings from a number of European airlines are ringing alarm bells and providing a reminder of the fragility of profitability in the industry. Airlines of different sizes, shapes and geographies have been prompted to announce a lower outlook for 2014 earnings, including Lufthansa, Finnair, Aer Lingus and Icelandair. Notably, these are all legacy carriers.
Although the details differ in each case, two broad themes emerge from these announcements. The first relates to signs of overcapacity in some markets, leading to revenue weakness. This is also linked with the growing competitive threat posed by alternative business models to Europe's legacy carriers, whether by LCCs on short-haul or Gulf carriers on long-haul.
The second theme is the impact that labour has on profitability, whether damaging it through industrial action, or assisting it through cost savings.