This essay uses the new European Union (EU) member country the Czech Republic (CZ) and explores the possible advantages and disadvantages and concerns for the airline industry. The country has 44 paved airports (CIA, 2006) and international airports at the following major cities; Burno-Turany, Ostrava, Prague (A-Z World Airports, 2006). In 2004 the Czech Republic was one of the fastest-growing tourism markets in the new EU member states. However, before May 2004 the number of airlines flying to and from this country was restricted, allowing carriers to maintain artificially high prices on many routes (Newman, 2005).
First this essay will explore the advantages of joining the EU to the airline industry as the travel and tourism industry constitutes an important part in the Czech Republic’s economy. Currently, every tenth person is employed in the travel and tourism industry or in some related sphere and foreign exchange earnings from tourism reached 118.13 billion Czech crowns (koruna) in 2001, constituting 5.5 % of the GNP (Czech Tourism, 2004). The introduction of low-cost flights has boosted tourism to the Czech Republic and all the new EU countries have benefited from the expansion of low-cost airlines and favourable exchange rates between local currencies and the euro. Also, small cities are becoming increasingly popular for weekend breaks as tourists search for new destinations and take advantage of cheaper flights. Other sectors of leisure tourism, such as spa or ski holidays, are also emerging, while business travel to central and Eastern Europe is increasing (Newman, 2005).
Further to this, The World Travel and Tourism Council (WTTC) estimates an extra three million jobs and 46 million euros will be generated if the 10 new entrants, which include the Czech Republic, bring their tourism industries up to the level of existing EU members (Travel Weekly, 2004). Since 2004, full British passport holders and citizens of the Europe Union do not require a visa to enter the Czech Republic (Czech Tourism, 2004). And export and import of Czech koruna is permitted without authorization from the Czech National Bank to the amount of CZK 350.000 (£8,360.35 GBP). There are no restrictions on export and import of foreign currency (Ibid). Making conditions more favourable for tourists.
Budget airlines have already had a big impact on tourism in the new EU states and the growth of the low-cost sector is likely to continue, bringing further benefits. The opening of new routes through regional airports will help to improve access and establish new tourist destinations (Newman 2005). The travel industry is far from saturated (The Engineer, 2005) and flight prices in the new EU states have already fallen as these countries have now adopted the EU’s Open Skies policy (Europa, 2005b), which encourages greater competition on intra-EU routes. Prices on international and domestic routes are set to fall further as a result (Newman, 2005). In fact, Czech Tourism has cited the introduction of low-cost flights as one of the main reasons behind the 19% increase in foreign visitors to the Czech Republic in 2004 (ibid).
Such rapidly increasing low-cost traffic means that many EU airports are now expanding to cope with demand, often with private finance. Airport developments are helping to make new destinations to the latest EU countries more accessible to tourists. In December 2005 a new north terminal two is scheduled to open at Prague Ruzyne airport, which is due to be privatised in 2006. Passenger numbers at the facility increased by 15% in the first half of 2005 after rising by almost 30% in 2004. The new second terminal is expected to boost annual capacity at the location by 4m to 10.5m (Newman, 2005).
However, the Europa website 2005 a highlights concerns over such expansive growth of the travel industry generally. They state:
“Open frontiers and affordable transport have given Europeans unprecedented levels of personal mobility. The European Union has contributed by opening national markets to competition and by removing physical and technical barriers to free movement. But today’s transport patterns and growth rates are unsustainable.”(Europa, 2005a)
The EU Manifesto published in 2004; states new member governments need to recognise the importance of travel and tourism and allow the industry a high priority in policy formation and budget allocation (Travel Weekly, 2004). Many issues have been raised including concerns over; security issues, safety in air traffic control, air pollution, fuel use and increasing energy efficiency (Europa, 2005b). The Engineer 2006 are more blunt in voicing their concerns, stating that there are the potential problems of extremely high oil prices, the threat of economic recession, terrorism, war and global health scares like SARS or bird flu. These problems potentially could be the start of an industry slowdown.
Europa 2005 recognises that the inevitable expansion of airport capacities needs to be linked to new EU regulations to reduce noise and emissions caused by aircraft (Europa, 2005a). But the European rules and lawmaking powers also cover; environmental issues, consumer protection, all manner of business regulations, health protection, human rights issues, negotiation of trade agreements and air transit treaties, and the management of a single currency (Wyatt, 2005). In fact, The Czech Republic airline industry is party to the following environmental regulations: Air Pollution, Air Pollution-Nitrogen Oxides, Air Pollution-Persistent Organic Pollutants, Air Pollution-Sulphur 85, Air Pollution-Sulphur 94, Air Pollution-Volatile Organic Compounds, Antarctic Treaty, Biodiversity, Climate Change, Climate Change-Kyoto Protocol, Environmental Modification, Hazardous Wastes, Ozone Layer Protection (CIA, 2006). All issues the industry will have to take into account. However in a 2001 White Paper on transport, the Commission set goals for each sector, some of which are already being implemented. These include, reducing flight delays by creating an integrated European air traffic control structure, mixing modes to offer greater efficiency, less congestion, lowering costs and cleaner air, and introducing integrated ticketing and baggage handling for dual mode journeys (Europa, 2005a). Fortunately some funding is available to tackle these issues (Europa, 2005b).
There are disadvantages to the air line industry in that the positive effect of exchange rates on tourism may be relatively short-lived. The Czech koruna has increased in value against the euro since 2004 and all of the new EU states plan to adopt the euro by 2010 (Newman, 2005).
A perceived disadvantage by employers may also be that The Amsterdam Amendments (1999) authorised the European Council to take unanimous action to combat discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation (Wyatt, 2005). This could grate against long held cultural bias, prejudices and beliefs, but would also benefit many people who have been previously disadvantaged, find employment.
To conclude, before May 2004 the number of airlines flying to and from the Czech Republic was restricted, allowing carriers to maintain artificially high prices on many routes (Newman, 2005). But, in 2004 the Czech Republic was one of the fastest-growing tourism markets in the new EU member states and currently, every tenth person is employed in the travel and tourism industry (ibid). The introduction of low-cost flights has boosted tourism to the Czech Republic and as the figures rise more jobs will be created (Travel Weekly, 2004). In fact, low-cost flights are one of the main reasons behind the 19% increase in foreign visitors to the Czech Republic in 2004 (Newman, 2005).
However, the Europa website 2005a highlights concerns over such expansive growth of the travel industry stating the growth is unsustainable. Also, many issues have been raised including concerns over security issues, safety in air traffic control, air pollution and fuel use and increasing energy efficiency (Europa, 2005b). Fortunately some funding is available to tackle these issues (Europa, 2005b).
But the exchange rate will impact on the cost of flights along with rising oil prices to make them more expensive to potential buyers.