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European ruling to 'reshape aviation'
By Geoff Hiscock
SYDNEY, Australia (CNN) -- A court decision in Europe this week has the potential to reshape the global aviation industry, with significant impact on Asian carriers, according to the Centre for Asia Pacific Aviation. The European Court of Justice, Europe's highest court, has ruled that national restrictions on airline ownership are illegal -- a decision that effectively treats Europe as a single aviation market. The center, a leading industry analyst based in Sydney, says the court's ruling means that any European airline can fly on bilaterally agreed routes. It means, for example, that if France grants Japan rights to fly Tokyo-Paris, France must now permit any airline based in the European Union -- such as Lufthansa or Alitalia -- to be designated to fly that route. In the ruling, released in Luxembourg on Tuesday, the court said eight European Union states had broken E.U. legislation by striking bilateral "open skies" air transport agreements with the United States. (Full story) The center says the decision implies than any new E.U.-based airline may demand access to any international route. It also says the European Commission now has exclusive power over airport slot allocation. A key issue"In the short term this could become a key issue for Asia Pacific airlines at Europe's capacity-restricted airports," the center noted in an analysis of the decision. The group said the ruling immediately makes bilateral negotiations with E.U. countries "extremely complex"; makes mergers between E.U. airlines much easier; raises questions about pre-existing bilateral agreements; and gives the European Union greater negotiating power The center noted that the court decision was a "large step" towards establishing a European aviation trading bloc, and highlighted the fragmented nature of the Asian marketplace. It warned that it would likely lead within three years to a single North Atlantic market covering the United States and the European Union that would dominate international aviation policy. "Asian governments will become the minnows of the bilateral negotiating world," the center found. It noted European airlines would quickly become "megalithic," though mergers. An attempted merger between British Airways (BA) and KLM Royal Dutch Airlines was aborted in September 2000, in part because of political and regulatory issues. Few big carriers in Asia
The world's four biggest carriers, measured by the industry standard of revenue passenger kilometers, are all in the United States -- American, United, Delta and Northwest. BA and Air France rank fifth and sixth, with Lufthansa in eighth spot behind Continental. The first Asian carrier is Singapore Airlines at No. 9, followed by Japan Airlines at No. 11, Qantas at No. 15 and Hong Kong's Cathay Pacific at No. 16. Some analysts have suggested that only pan-Asian mergers will give the region's airlines the bulk to stand up to European and North American rivals. Qantas, the Australian carrier that is among the most profitable airlines in the world, is likely to strike an alliance with Air New Zealand before the end of the year. That deal could include an equity stake in the New Zealand carrier of up to 25 percent. (Full story) Qantas itself is 47 percent held by offshore interests, including about 17 percent by British Airways, its partner in the Oneworld alliance. There has been occasional speculation that Singapore Airlines is interested in taking over the BA stake in Qantas, should it become available. The world's three busiest airports are in the United States -- Atlanta's Hartsfield, with 75.8 million passengers last year, Chicago's O'Hare, with 66.8 million, and Los Angeles International, with 61.0 million. They are followed by London Heathrow with 60.7 million and Tokyo's Haneda, Japan's main domestic airport, with 58.7 million.
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