The crisis in air transport and the future structure of European airlines and airports.

In the last few years major structural and organisational changes have been occurring within the air transport industry. Major airlines have been consolidating their services by forming international alliances whilst a new generation of low cost carriers have entered the market. At the same time, a growing number of airports have been privatised which has allowed airport groups, which control a number of airports in different countries, to develop. It is generally thought that the events of 11 September 2001 will accelerate the trend towards greater consolidation in the airline industry. However airport privatisation may be put on hold for some airports, at least in the short-term, due to the more uncertain air transport environment. This paper assesses the future shape of the airport industry, particularly in light of the current crisis caused by the events of September 11 and the less than favourable economic climate. It considers traffic and financial performance of major European airports prior to and after the terrorist attacks. It looks at how airlines' responses to lower passenger numbers, such as the abandonment of routes or the use of smaller aircraft size, have affected airport operations. It also assesses how reduced passenger demand, increased security and insurance costs, and increased pressures from the airlines to maintain or reduce current levels of aeronautical charges, will impact on future privatisation or longer-term investment plans. Finally, the effect of airline structural changes on airports is evaluated. This involves consideration of the consequences of further airline consolidation and the challenges presented by an increased dependence on a limited number of airline customers. Airline failure and the impact on airports is also considered. The paper concludes by assessing how the future structure of the airport industry will differ from the current situation and identifies the airports which are most likely to experience the greatest change. For the covering abstract see ITRD E124693.