Humberside
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No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 4:42 am

http://scotlandonsunday.scotsman.com/business.cfm?id=1335442006#new

Quote:
DIRECT flights from Scotland will be severely curtailed from next year after the European Commission ordered an end to subsidies to long-haul destinations.

Scotland on Sunday has learned that the EC, under pressure from European national flag carriers, has stepped in to curb expansion of Scotland's international air services.

In a move that will dismay business and leisure travellers alike, the EC will not permit the Executive to invest further taxpayers' money from the Route Development Fund into flights beyond European Union boundaries.



Quote:
It has been copied in Northern Ireland, but it is understood that some of the big European airlines, whose identities have not been disclosed, have been lobbying against it.

Another reason to leave the EU

The system is fair and non-discriminatory. Are airlines concerned about less transfer passengers at their hubs? Well how about responding to the changing market and launching new point to point flights or opening new routes from their hubs to smaller markets (eg KLM to Chengdu) rather than moaning to the EU?

And dont the EU recognise the role of the RDF in economic development? Im not surprised the Scots are outraged. I hope this mess gets sorted out
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LAXintl
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 4:55 am

Hate to say it, however good for the EU!

Government subsidies do nothing more than skew the market place, creating an unbalanced playing field. If a market cannot sustain itself on its own economic merits, why should a small group of people benefit via costly subsidies?

Not that I have anything against Scotland, however is having long haul links truly a dire and essential thing? It might be nice or convenient, but far from essential.
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ZRH
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 4:55 am

I actually don't see any reason to give airlines public subsidies for some routes. Only routes which are economical should be flown the others not. Period. If you don't have the market for these flights there is also no need for them. From Scotland for example you can easily change planes in London, Amsterdam or anywhere else.

[Edited 2006-09-10 21:58:58]
 
JGPH1A
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 4:58 am

Only flights that are required to provide vital economic links or maintain territorial integrity should be subsidised. Flights from Scotland to the US and Canada are neither - if they are not profitable, why should taxpayers pay for them ?
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panamair
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:05 am

Quoting JGPH1A (Reply 3):
if they are not profitable, why should taxpayers pay for them ?

But if Scottish taxpayers approve of them (I don't know if they do, but for arguments' sake they do) because they want convenient nonstop service to the U.S., for example, why shouldn't they be allowed to spend that money any way they choose, even if it's not economical?
 
ahlfors
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:06 am

I think one does have to look at this from a market based perspective, and not just the airline market, but the entire local market. The question basically is, is the taxpayer getting a good return for their money. Subsidising a loss-making service makes sense if the total economic benefit of having the flights to the local (Scottish in this case) economy is greater than the money spent. I mean if it costs $10 million to subsidize the flights, but the economic impact of having such flights is a $15 million increase in the local economy, then it makes economic sense, and should be allowed.
 
GLAGAZ
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:13 am

Quoting Laxintl (Reply 1):
Government subsidies do nothing more than skew the market place, creating an unbalanced playing field. If a market cannot sustain itself on its own economic merits, why should a small group of people benefit via costly subsidies?

So there is no demand from Scotland to EWR, ATL, DXB etc which have all been subsidised and are all proving extremely popular?

No, the problem here is that BA want to feed everything through LHR/LGW, AF want to feed everything through CDG/ORY, LH FRA/MUC, KL AMS...and they have all gone bitching to the EC because other airlines offering non-stop international flights from Scotland and stealing their paxs and lowering their yields.

Sometimes all an airline needs to start a route is a little encouragement, so whats wrong with offering it?

Gaz
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JGPH1A
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:14 am

Quoting Panamair (Reply 4):
But if Scottish taxpayers approve of them (I don't know if they do, but for arguments' sake they do) because they want convenient nonstop service to the U.S., for example, why shouldn't they be allowed to spend that money any way they choose, even if it's not economical?

But it's not Scottish taxpayers money that is being spent - it's EU taxpayers money. And any subsidies payed by Scotland must be made available to any EU-based carrier, not just Scottish/British ones.
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panamair
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:19 am

Quoting JGPH1A (Reply 7):
And any subsidies payed by Scotland must be made available to any EU-based carrier, not just Scottish/British ones.

But aren't the Scottish subsidies available to just about any carrier willing to start flights to GLA/EDI - that's why we have DL to ATL from EDI, EK to DXB from GLA, etc. In fact, isn't it precisely the British carriers that don't want to start nonstops out of EDI/GLA?
 
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mariner
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:24 am

Where do you draw the line?

Stockton, California, desperately wants an "international" airport, and has complained to their local representing politician to get one.

But they are sixty miles from three major international airports.

So they'll get their FIS facility through political intervention, and then they'll offer subsidies to an airline to use those facilties, and then Modesto, twenty four miles away, will want their own international service.

And all that money p*ssed down the gutter could be used for things that actually are of value to the community.

cheers

mariner

[Edited 2006-09-10 22:25:29]
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LAXintl
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:24 am

Quoting GLAGAZ (Reply 6):
So there is no demand from Scotland to EWR, ATL, DXB etc which have all been subsidised and are all proving extremely popular?

Its terrific the routes are "popular" but can they support themselves sans the subsidies?
If they can, thats wonderful, if not however they should certainly not continue. Why should millions of people be subsidizing a service being used by a small group? There are hundred of communities around the world that likewise would love to have various services, however cant as the economics are simply not there.

As far as the hubs, while they might seem inconvenient, they offer the Scottish flyer and for that matter any flier much greater access to many markets that could never be supported on their own.
I bet you you can access 100's of individual markets one-stop via these hubs that could ever come close to supporting direct service to Scotland.
Hubs provide a very valuable means of liking the world.
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cedarjet
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:25 am

Quoting Laxintl (Reply 1):
Government subsidies do nothing more than skew the market place, creating an unbalanced playing field. If a market cannot sustain itself on its own economic merits, why should a small group of people benefit via costly subsidies?

This free market nonsense only goes so far. You're saying Scotland should just be abandoned? Air service is an essential utility. The air service may be unprofitable, but the business it brings supports a whole nation and generates loads of money for the treasury. Who's to say the tax payer is better off without paying the subsidy. I say the tax payer is ahead, if the subsidy is paid. Think how much revenue is generated by the traffic brought in by longhaul direct flights.

People who are dogmatic about the free market are doomed to the same fate as commies were dogmatic about socialism. The solution lies in the middle. But Americans only seem to do black and white. Much of the world is gray, believe it or not.
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GLAGAZ
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:31 am

Quoting Laxintl (Reply 10):
Its terrific the routes are "popular" but can they support themselves sans the subsidies?

I'm pretty sure the funding only lasts for a year. But for instance, EDI-EWR was initially daily in the summer and 5x weekly in winter. Last year it was 10x weekly in summer and daily in winter. This year it is 11x weekly in summer and daily in winter.

GLA-DXB was initially an A332 service, but upgraded to a 77W. It is also widely reported that EK are looking to either add a second GLA flight or start EDI operations.

Quoting Laxintl (Reply 10):
I bet you you can access 100's of individual markets one-stop via these hubs that could ever come close to supporting direct service to Scotland.

That is always going to be true, but there are still many destinations which can be supported from Scotland.

Quoting Laxintl (Reply 10):
Hubs provide a very valuable means of liking the world.

True, but Boeing and Airbus see the balance changing from a hub reliant one to a mixture of both, hence the 787 and A350 to go along with the 748 and the A380.

Gaz
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ZRH
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:41 am

Quoting Cedarjet (Reply 11):
You're saying Scotland should just be abandoned?

Scotland being abandoned?? That's ridiculous. How fare is Scotland from London, less than an hour flight. Berlin for example is much bigger than Glasgow or Edinburgh and does not have intercontinental flight as well.
 
Humberside
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:44 am

Quoting JGPH1A (Reply 7):
But it's not Scottish taxpayers money that is being spent - it's EU taxpayers money

The RDF funding comes from the Scottish Executive which as far as Im aware is funded by Scottish taxes and not by the EU

Quoting ZRH (Reply 13):
and does not have intercontinental flight as well.

DL to JFK
CO to EWR

[Edited 2006-09-10 22:47:41]
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WesternA318
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:46 am

Just got a question on it all....

How does this affect CO?
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JGPH1A
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:48 am

Quoting Humberside (Reply 14):
The RDF funding comes from the Scottish Executive which as far as Im aware is funded by Scottish taxes and not by the EU

Oh. But then that's the same thing as the airports in France that subsidised FR to fly to them - that's not legal. Government subsidies to airlines are not allowed, except for economic lifeline and territorial continuity. GLA-EWR is neither. Scottish taxpayers, aviation enthusiasm aside, should be militating for better air links to London, never mind direct flights to Dubai - I for one would be miffed if my tax money was being splurged so that people on expense accounts could fly direct EDI-EWR, when they would be travelling anyway, via somewhere else, without the subsidy.
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LAXintl
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:49 am

Quoting Cedarjet (Reply 11):
You're saying Scotland should just be abandoned? Air service is an essential utility

Scotland is far from being abandoned. It matter of fact has a very vibrant aviation market and where Europe's top LCCs offer frequent services to many destinations.

What I will say however is that long haul air service links to the US or other places is far from being "essential" if they cannot be supported on their own economic merits.

Using your reasoning, I guess the European tax payer will have to fork out huge sums of money to increase long haul services from other markets such as Lyon, Barcelona, Geneva, Berlin, Marseilles, Athens, Sofia etc.. which have minimal if any long haul service.

At the end of the day, the market will take care of itself. If Scotland can indeed support services across the globe, the airlines will come.
No need to skew this with subsidies that only benefit a small group of people and can be viewed as discriminatory to other airlines and markets.

Quoting Cedarjet (Reply 11):
But Americans only seem to do black and white. Much of the world is gray, believe it or not.

While I might be located in the US, I am not native born. European actually, but strongly believe in the efficiency of the market based economy and dislike the European tilt towards government intervention in many aspects of life across the pond.

Quoting GLAGAZ (Reply 12):
eekly

Glad to hear the services are doing well.
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CXA330300
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:50 am

No one says anything about state aid to flag carriers.....

Quoting ZRH (Reply 13):
Berlin for example is much bigger than Glasgow or Edinburgh and does not have intercontinental flight as well.

TXL has routes to EWR, JFK, ULN, and DOH. SXF has routes to TLV, CAI and soon HKG as well as charters to Mombasa.
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DeltaSFO
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 5:51 am

Quoting Laxintl (Reply 1):
Hate to say it, however good for the EU!

Government subsidies do nothing more than skew the market place, creating an unbalanced playing field. If a market cannot sustain itself on its own economic merits, why should a small group of people benefit via costly subsidies?

Out of curiosity, are you of the opinion that Essential Air Services subsidies here in the U.S. should also be done away with?
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GSM763
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 6:03 am

There will always be a need to subsidize certain air services. For example the services to the Scottish islands I'm sure everyone would agree is an essential service that can't be made commercially viable. The difficulty is where you draw the line at what is essential. Is a GLA-BRS flight essential? While the loss of this money pot is a blow to Scottish air routes it does put Europe on a level playing field and I believe may be one of the concessions made by the EU in order to facilitate faster EU-US open-skies. We have seen argument after argument here over Ryanair getting money to fly from say HHN-SDR which many would argue is a far from essential route. However when we see for example a route from GLA-BOS we welcome it with open arms. This is not a level playing field and must be changed. I'm all in favour of new routes from Scotland (obviously being resident there) however I don't think money should be sunk in to routes which can't pull their weight.
 
Sydscott
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 7:28 am

Quoting Laxintl (Reply 17):
What I will say however is that long haul air service links to the US or other places is far from being "essential" if they cannot be supported on their own economic merits.

So what's wroing with Government giving an incentive for new routes to be tried? If no airlines will try the routes then they won't know if they can be supported on their own economic merits. Surely that is one of the roles of a good Government in seeking to expand their economies?
 
LAXintl
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 8:41 am

Quoting DeltaSFO (Reply 19):
Out of curiosity, are you of the opinion that Essential Air Services subsidies here in the U.S. should also be done away with?

Personally, I accept them, but not enthusiastically. I do see how they can be classified as "essential". I suppose in for such remote communities one does not have a choice.

Quoting Sydscott (Reply 21):
So what's wroing with Government giving an incentive for new routes to be tried? If no airlines will try the routes then they won't know if they can be supported on their own economic merits

Generally airlines do lots of market research to determine if a route has any potential. It should not be the governments place to put money on the table to provide services in markets that otherwise naturally would not have any.
Again, if some the the Scottish long haul routes work, that is terrific, however there is nothing "essential" about Scotland having links to Atlanta, Dubai etc..

I certainly would not want my tax dollars to try to create odd ball routes from my home town. If any airline want to try it at their risk fine, however why should tax dollars go to subsidize such questionable forays?
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nzrich
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 8:59 am

Sometimes when airlines are looking at new routes ..If a country is going to help them out with advertising etc etc it could be the swaying factor for the start up of a route over another destination.. Personally i dont believe in permanent subsidies for routes that will never become profitable except if its a lifeline ie to some island that has no other way of getting easily to a major city. But if its just a one off incentive to get a service started that will be profitable whats wrong in the end it becomes a win win situation for the community.. Also the with direct services you also have the added benifit of freight capacity for exports.. The whole community wins with direct services tourists exports etc etc..

Lots of countries / airports off incentives for new routes ie half price landing fees just to get new routes flying ..The incentives are paid for a set period and i dont see what is wrong in the slightest there ..
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LAXintl
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 11:26 am

Quoting Nzrich (Reply 23):
Lots of countries / airports off incentives for new routes ie half price landing fees just to get new routes flying ..The incentives are paid for a set period and i dont see what is wrong in the slightest there ..

Its one thing to offer some temporary incentives such as fee reductions, which are very much along the lines of commercial and consumer marketing agreement in all types of industries.
It is a very different thing for the government to offer subsidies in the form of covering and airlines operating losses on a route, or by guaranteeing a certain level of profitability.
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vega
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 11:52 am

The largest airline subsidies in the world are the U.S. Bankruptcy laws.
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Sydscott
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 1:15 pm

Quoting Laxintl (Reply 22):
It should not be the governments place to put money on the table to provide services in markets that otherwise naturally would not have any.

So on that basis you're not in favour of retaining any of the domestic US funding for Essential Air services either.

C'mon drop the textbook market line here. One of the primary roles of government is to provide services to the community that otherwise would not be provided by the private sector. If the Scottish Government is subsidising the development of air services then obviously they see a net economic benefit to having people flown directly in. Sure airlines do their own research before starting up markets and if their weren't pax and demand for the flights then they would not continue. But it's their very success in attracting these direct flights that has raised the ire of the National Flag Carriers. Good on Scotland I say.

Quoting Laxintl (Reply 22):
If any airline want to try it at their risk fine, however why should tax dollars go to subsidize such questionable forays?

There are far worse examples of government waste than throwing a few million dollars at an air route. Build the route and the passengers will come but if no-one is willing to even try doing so then you will never know.

Quoting ZRH (Reply 2):
From Scotland for example you can easily change planes in London, Amsterdam or anywhere else.

I gather you haven't changed planes in London post the last terror scare?? What an absolute nightmare Heathrow is at the best of times, lot alone now!!
 
nzrich
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RE: No More Funding For Scottish Long Haul Flights

Mon Sep 11, 2006 8:58 pm

Quoting Laxintl (Reply 24):

Its one thing to offer some temporary incentives such as fee reductions, which are very much along the lines of commercial and consumer marketing agreement in all types of industries.
It is a very different thing for the government to offer subsidies in the form of covering and airlines operating losses on a route, or by guaranteeing a certain level of profitability.

Being honest either way a subsidy is paid ie reduced landing costs or a guarranteed income its still a subsidy!!! As VEGA said the largest subsidy of them all is the US bankruptcy laws !!!!! Mind you if there was laws in the us regarding bankruptcy like most other countries basically all your major airlines would of been liquidated and new airlines probably operating instead..
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