chapter  6
48 Pages

Pricing power

There is also extensive variation across routes. There are often marked differences in fare levels from route to route, even when the distance flown is roughly the same. Fare levels taper with distance, so that the fare per kilometre is often much lower on a long route than it is on a short one. But even allowing for this, in comparisons of routes of the same or similar length, some considerable differences remain. There are some wide differences by region. Table 6.1 draws some comparisons between International Civil Aviation Organization (ICAO) route groups. What stands out from this is that average fares – proxied by average revenue per passenger kilometre – were much higher in Europe than elsewhere. In interpreting these comparisons, two important qualifications should be made. First, no adjustment was made to allow for the taper in fares with distance. Given that there is a preponderance of short-haul routes in Europe, average revenue or fare per kilometre was always likely to be higher there. But even if some adjustments for this were made – as they were when ICAO fares data was available by route distance as well as by route group – the comparisons would still have shown European fares greater than fares in other route groups. The second qualification concerns the fact that the average revenues in Table 6.1 relate to the year 1999. A lot has happened since that time. Report

after report, from bodies like the House of Lords Select Committee on the European Communities and the Air Transport Users’ Council, levelled some strong criticisms at European fare levels. The general view was that European fares were very high. But not anymore.