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The markets we operate in

Competition

In response to the worsening economic conditions, the airline industry is in the process of change in a number of areas.

Consolidation

Weaker customer demand coupled with record fuel prices, has sped up consolidation in the airline industry. Some 35 passenger and cargo carriers have either gone out of business or been absorbed into other airlines. In Europe, five independent airlines have been, or are in the process of being, taken over by competitors.

In an effort to protect their airline industry from the effects of the financial crisis and global recession, some governments have resorted to bailout programmes. This has been particularly true in a number of major emerging markets, most notably China, India and Russia.

Increased competition

Most of the markets in which we operate are highly competitive. Levels of competition vary, route by route. On a few international routes competition is restricted to national airlines and fares are regulated. At the other extreme there is a free market for internal flights within Europe allowing any European airline to operate any route and set its own fares.

Shorthaul market

On shorthaul routes, we face competition in the air and on the ground. Train operators in the UK are taking a bigger share of the air/rail travel markets, now that infrastructure improvements have cut journey times on key lines such as the West Coast mainline. Eurostar overcame disruption caused by the tunnel fire and carried 10 per cent more passengers in 2008, at a time when demand for flights from London to Brussels and to Paris fell by 20 and 13 per cent, respectively.

Budget airlines are continuing to grow, but have switched their priorities to growth at continental airports. There has been little organic growth in their London operations. At the same time, full service airlines have reduced their presence in London, cutting seat capacity by 5 per cent in 2008, although little of this reduction has been focused on the airports from which we operate.

“Some 35 passenger and cargo carriers have either gone out of business or been absorbed into other airlines.”

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