Review of Industrial Organization 20: 127–150, 2002.
© 2002 Kluwer Academic Publishers. Printed in the Netherlands.
Barriers to Mobility in Europe’s Civil Aviation
Markets: Theory and New Evidence
CHRISTOS N. PITELIS
The Judge Institute of Management and Queens’ College, University of Cambridge, U.K.
MIRKO C. A. SCHNELL
The Judge Institute of Management and Darwin College, University of Cambridge, U.K.
Abstract. A questionnaire-based survey is applied to investigate the perception of mobility barriers
by European airline managers. Whilst the liberalisation of Europe’s airline markets removed regu-
latory mobility barriers, we ﬁnd that mobility impediments still appear to exist. Potential entrants
moreover, perceive some mobility barriers as signiﬁcantly more effective than others. The perceived
effectiveness of a particular mobility barrier varies considerably among airline managers. We also
provide an overview of previous studies on the contestability hypothesis and the effectiveness of
endogenous (strategic) mobility barriers. Our results support earlier ﬁndings for the U.S. to the effect
that barriers to mobility are perceived to exist and matter. Whilst our results are clearly subjective,
as they are based on the perceptions of managers, we believe such perceptions matter as they inform
managerial actions. In this sense we believe our results are of value.
Key words: Airlines, contestable markets, entry, European Union, liberalisation, mobility barriers.
The liberalisation of Europe’s civil aviation markets aimed at fostering competition
among airlines. It was carried out in several steps and completed in April 1997.
Since then, airlines are allowed to ﬂy on whichever route they want within the
European Union (EU) countries, if they have their home-base in the EU, Norway
or Iceland. Moreover, airlines face almost no further constraints in setting fares.
It can be claimed that passengers may beneﬁt from the liberalisation in the form
of lower fares, more routes and higher frequency. These effects might result from
more intensive competition, mainly, as the removal of regulatory mobility barriers
would facilitate new entry. According to the “Contestable markets” theory, in the
We are grateful to two anonymous referees for and the Editor of this Journal and to John
T. Scott for very detailed and useful comments on earlier drafts of this paper. Schnell thankfully
acknowledges ﬁnancial support from the Cambridge European Trust for his M. Phil. research on
which this paper is based. Errors are ours.