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City and finance

Routes News

30 Mar 2017

BY Edward Robertson


Geopolitics will have 'major impact' on low-cost carriers

Low-cost carriers (LLCs) remain particularly vulnerable to the effects of geopolitical events, according to a leading lawyer.

Alan Polivnick, Watson Farley & Williams

"If the missile situation in North Korea worsened, would we see the closure of airspace between China and the US?"

Presenting at the Routes Asia 2017 Strategy Summit in Okinawa, Japan, Alan Polivnick, a partner at international law firm Watson Farley & Williams, said new problems were emerging globally on a regular basis.

He added this could have a severe impact on the global aviation industry if governments in the Asia-Pacific region and beyond seek to use airlines as “pawns”.

Polivnick said: “If the missile situation in North Korea worsened, would we see the closure of airspace between China and the US?”

He claimed problems had already emerged between the two countries – American Airlines is still waiting to be allocated slots at Beijing Capital International airport despite the pairing being agreed about a year ago.

Polivnick warned LCCs were particularly vulnerable as they often don’t have the backing of governments that a national legacy carrier enjoys.

He added: “Geopolitics is going to have a major impact on how LCCs grow – there are going to be flashpoints.

“A government issue or travel alert is almost immediately translated into lost bookings. The issue is not necessarily a government issue, but an insurance issue.

“If you’re a privately owned LCC and you’re challenging the national flag carrier, the government might not be so keen to help you out.”

Polivnick also warned that even when there aren’t problems, LCCs can find themselves at a disadvantage to their legacy rivals.

He said: “In many situations the government owns the airport, airlines, ground handling, or it is delegated to the national carrier.

“But there is no independent means to challenge the slot you’ve been given. Sometimes airlines are given unusable slots – if you have a curfew for example.

“It is not just Asian carriers that will be affected by this. Any carriers trying to get traffic rights in China or Asia will sometimes find themselves affected by the local politics.”

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