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Air transport of passengers in Europe

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There are now hundreds of airline companies (including 160 in Europe), which offer different services and prices, giving consumers a choice of high performance.

However, it is possible to classify companies into three major groups: the majors (big companies, which are often state-owned companies), the Charters (companies often chartered by travel agencies) and finally, the Low Cost (companies offering benefits reduced to their minimum prices below).

The offer, which seemed so significant, is therefore reduced when it is divided into groups by companies, to the extent that each group has more or less the same services.

In Europe, the lack of a common policy on regulating air transport increases the competitive intensity. Indeed, the airspace is currently divided into 27 areas (for 27 countries in the EU), which lengthens the duration of flights and incurs additional costs.

The number of these areas does not allow the liberalization of air traffic (draft "Single European Sky" is expected, however) because each state administers its own zone, which can lead to a national protectionism by encouraging companies in the state and thus reducing the intensity of competition.

The arrival of new entrants to a market that is already struggling to find new customers is not easy. The airline industry passenger incurs substantial costs (including R&D and purchase of aircraft), reinforced by the increasing cost of higher commodity prices. On the other hand the sector requires experience and seniority in the market is an asset (production of "slots" to create customer loyalty).This makes it all the more difficult for new companies trying to make an entry.

These are not the only barriers that new companies face, as those companies already in the market can also deploy the means to prevent the arrival of new entrants. The proliferation of alliances, Air France- KLM for example follow this logic.

With wholesale groups present in the market a monopoly is created and they can put pressure on suppliers and customers making it all the more difficult for the new entrants.

These large groups, have cash reserves far exceeding those of the new entrants and can afford to provide full service because low-cost flights or operations is not a priority.

It is possible to roughly divide the customer's air travel market into two, the leisure and fifty percent (tourism, vacation and family in equal proportion) and business customers to fifty percent (Congress for third companies and to 2/3). This distinction tends to amplify the bargaining power of customers.

Business customers are not overly affected by the prices of tickets (tickets paid by the company), while the leisure travelers is. It is this latter group that makes extensive use of low cost airlines (although professionals SME or professionals are turning increasingly to the Low Cost).

The bargaining power of customers of leisure is high and tends to drive prices down. But business customers, which certainly cannot do without the airline also has a strong bargaining position and it is through this that the main revenue comes from companies.

The bargaining power affects the quality of service and requires companies to meet schedules, provide services high in the cabin or flight schedule.

Tags: Air transport in Europe, Low cost airlines, passenger travelling

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