SURVIVING THE SINGLE MARKET: The dilemmas and strategies of “small-country” airlines Martin Staniland SUMMARY: This paper examines the problem of the survival of national “flag carrier” airlines of smaller Member States of the European Union in the increasingly competitive environment of the single European market. After considering the particular features of smaller countries as aviation markets, it discusses the advantages and disadvantages experienced by airlines based in such countries under the current international regime for commercial aviation (the so-called Chicago system). The paper then analyses the strategic responses of selected airlines (mainly Aer Lingus, Finnair, KLM Royal Dutch Airlines, Sabena, SAS and TAP Air Portugal) to the challenges of the single market. In particular, it explores efforts to establish global systems, to create European and long-haul niche markets and to form protective alliances between “small-country” carriers. The paper concludes by noting the tendency for the surviving national airlines of smaller Member States to become incorporated into the current global airline alliances as junior partners and the reasons for their accepting this status. Introduction : Ever since the beginning of commercial aviation in Europe, observers have deplored the multiplicity of national, “flag carrier” airlines. In 1918, Alfred Instone - the founder of one of the first British airlines - warned of the dangers that nationalism posed for the growth and efficiency of the new industry: it was, Instone argued, impossible to control the air services of Europe on nationalist lines. You cannot have nearly forty sovereign countries each trying to wreck the air services of the other thirty-nine. Europe must be one area for air transport under one control, or there can be nothing but a few ferry services in operation. 1 More recently, airline executives, European Commission officials and journalists have predicted ------------------------------------------------------------------------------------------------------------------ ---- I wish to thank Dr. Anthony Zito and Ms. Janet Sharpe of the Jean Monnet Centre at the University of Newcastle upon Tyne for their hospitality and helpfulness in the writing and editing of this paper (a full-length version of which may be obtained by contacting me by e-mail at mstan@pitt.edu). For their help in obtaining documents relating to Aer Lingus and to Irish aviation policy, I am most grateful to Mr. Andrew Cullen and Mr. Paddy Fay, previously of the Permanent Representation of Ireland to the EU. Mr. Cullen was also very generous with his time in helping me to understand Irish policy toward air transport as well as the larger economic context of policy-making.