O'Leary: EU should give European airline aid, not just national
Ryanair CEO Michael O'Leary has some novel thinking regarding airline state aid in the coronavirus crisis.
He may have a point. All airlines serving a country provide it with connectivity and wider benefits to the economy of that country, so perhaps any aid should be shared among them. Arguably that would be in the wider European interest.
- Ryanair's Michael O'Leary proposes a centralised aid strategy,
- Financial support would be proportional to the airlines' shares of each country's traffic
- This would replace the current "each country for itself" approach to funding support
- Never waste a good crisis: a great opportunity to recognise the changed role of aviation
Michael O'Leary: any state aid should consider the future structure for aviation
Ryanair's Mr O'Leary's suggestions raise some important issues, founded on a "modern" logic that moves away from supporting "flag carriers" to supporting a wider national interest proposition.
The EU is supposed to be a borderless single market indifferent to the individual nationalities within it, even if the coronavirus has temporarily rebuilt borders.
The piecemeal, each country for itself, approach currently being adopted by many European states towards financial support for their airlines goes against this.
Including all EU airlines serving a country in proportion to their traffic share would be more transparent, and would recognise the role played by all of them in providing connectivity.
In addition, governments often talk about the wider benefits to their economies from aviation, beyond the immediate benefit to the individual who is purchasing a flight.
Particularly in extreme cases of market failure, such as the current crisis, governments should consider contributing to the cost of what it considers to be public goods.
Future connectivity should be the core goal in the post-coronavirus world
However, rather than simply bailing out airlines, public funds could be channelled towards maintaining future connectivity.
This could perhaps involve seeking bids from airlines to provide services after the crisis – similar to existing public service obligation, or PSO, arrangements (this should not, however, require airlines to maintain services during the crisis).
This would avoid picking national champions or directly bailing out weak or failing business models. This approach could also be flexed by governments to incentivise the transition to more environmentally sustainable operations.
Ensuring the survival of airlines based in their own country through the crisis is the main focus for governments considering financial support to airlines at the moment.
However, if and when demand returns, there will be plenty of aircraft and labour to meet that demand, regardless of the country of origin of the providers. Removing foreign ownership and control restrictions would help in this regard, and could save governments a lot of bailout cash.
Beyond the immediate survival of airlines, any state aid package should also consider the more important goal of ensuring the right structure for aviation in the recovery and beyond.
Never waste a good crisis: a great opportunity to rationalise an archaic system
Otherwise, we shall have missed the opportunity to benefit from the worst global crisis in a century, merely perpetuating 75-years of nationalism in the global airline regime.
The next few years will present a drastically different environment - economically and physically - for the airline industry and there are a million reasons to enter the new era with a different mindset.
This could replace the tried and tested aviation model where in most cases airlines have consistently struggled even to come near to returning its cost of capital.
Over the next few years, the world's tourism and travel industries will be devastated by the removal of a large proportion of airline capacity. New global visions will be needed if the airlines are to provide a platform for the tens of millions of jobs that have been put at long term risk.
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