Location, location, location…

As the Gulf mud-slinging enters yet another chapter, I’ve been questioning how much an airline’s home region has to do with its success.

For years now, IATA figures have shown a sharp divergence in regional fortunes. North America has shot to the top of the profitability leader board, Gulf carriers are on the rise, Asia is coming to terms with its growth potential, Africa remains shaky and Europe has lost its former glory.

It is all very polarized, but if European airlines were not based in Europe, would they be more successful? I’m not talking about British Airways doing ‘a Norwegian’ and setting itself up in another country. I’m creating a hypothetical world, where British Airways in its current size and scale has magically transformed to become an American, Gulf or Asian carrier.

While there is no doubt that European airlines have been inefficient in the past, nobody can argue that they have put in a lot of blood, sweat and tears into their turnarounds and I find it hard to believe that the leaders of all the major European airlines are getting it wrong. 

Isn’t it odd that after all this effort, none of Europe’s former flag carriers are doing as resoundingly well as their US cousins? Cue Chapter 11, maybe? Cue a far less fragmented market.

If we drop our hypothetical British Airways into the Gulf, all those Heathrow expansion woes would fade away and the labor issues that blight European carriers would suddenly (and somewhat controversially) disappear.

However, I would argue that the biggest culprit is fragmentation. Europe is fragmented, nationally, culturally and politically. Every EU decision reached is a long-winded compromise, rather than the most effective solution.

Europe is competing with itself – between its own countries – as well as with the rest of the world. There is political and cultural pressure for every country to have its own airline. This leads to sub-optimal results; just look at the politics still at play in Air France-KLM.

Likewise, Heathrow and Gatwick are battling to win the London airports debate, when the battle is really between London and the other global hubs; between Europe and rival regions.

The sad fact is that European airlines cannot change their geography, or they wouldn’t be European airlines. They can’t change cultures and – realistically - have little influence on politics. They just have to deal with the hand they have been dealt.

To corrupt a well-known phrase: “In establishing the profitability of an airline, what are three pretty important factors? Location, location, location.” However, strong leadership, a solid strategy, and revenues that exceed costs definitely help.