Regulation and Liberalisation in the UK Scheduled Airline Industry

Abstract

The general aims of the paper are, first, to discuss the role of the Civil Aviation Authority (CAA) as a regulator of the UK scheduled airline industry, prior to the implementation of European Community liberalisation of air transport on 1 January 1993. Second, the reactions of the industry itself to CAA policies are examined. Prior to a detailed consideration of the principles which illuminated the CAA's strategy, the constraints upon that policy are elaborated. Largely, these derive from the characteristics of airline economics and also from the UK government's commitment to privatisation, even at the expense of industry competitiveness. The three principles constituting the CAA's strategy—namely, the multi-airline industry, the primacy of long-term user benefits, and the promotion of a profitable UK airline industry—which were implemented primarily through a process of route licensing, are discussed in turn. It is concluded that user benefits have been realised from the CAA's regulation of both the structure and the behaviour of the industry, although a more pronounced latter-day emphasis on competition is detected. This may be related to the advent of European liberalisation which places only the most modest constraints on carriers' rights to fly whichever routes they wish.