business

New Energy For Europe's Airlines

Those who worry that Europe can't muster the dynamism to compete in a competitive global economy should take a look at its airline industry. With total deregulation due next Apr. 1, entrepreneurs are leaping into the competitive breach and pumping new energy into a stodgy, inefficient sector. A dozen new airlines have sprung up, slashing fares that have been among the world's highest.

This new competition will oblige Europe's big state-coddled airlines, such as Air France and Alitalia, to become more efficient. Without deep cost-cutting, the flag carriers of yore will never survive in the coming global air market. Lower airfares carry a second payoff. Air travel is one of the many bloated overhead costs that make it so maddeningly expensive to do business in Europe.

The lesson of this airline shootout is obvious. Europe's competitiveness problem is mostly regulation. Risk-takers are waiting to revitalize industry if governments will let them. Protecting telecom monopolies and other industries until they're "ready" for free competition is futile. Europe must loosen ties on labor and business eventually. Do it now.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE