The implications of the Ireland-UK airline deregulation for an EU internal market

Abstract

The deregulation of air transport between Britain and Ireland in 1986 brought reductions in fares of over 50% and a doubling of passenger numbers in contrast to high fare increases and market stagnation before deregulation. The factors which contributed to the greater success of this deregulation than on US internal routes or Anglo-Dutch routes included market stagnation before deregulation, weak competition from sea carriers, the lack of charter airlines, the large ethnic Irish population in Britain, a change in fashion away from sun tourist destinations, market exit by British Airways and the availability of low cost labour to the main new market entrant due to high unemployment in Ireland. The development of Stansted as an alternative to the slot-constrained Heathrow airport was critical. The implications of this successful deregulation for the EU deregulation in April 1997 depend on the strength of these factors in other markets and the deployment of pro-contestable policies on slot allocation, state aids and predation.