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This chapter focuses on the changing situation within Europe. Particular, but not exclusive, attention is paid to the aviation policy of the European Communities. The exposition form adopted is to initially provide some details of the nature of the European aviation market together with a brief discussion of some of the difficulties involved in analysing the reforms which have been occurring. The actual aviation industry which has emerged in Europe in the late 1980s is both a substantial one and a diverse one. Accompanying the changes in the regulation of domestic aviation within the USA and, indeed liberalization of other transport markets within Europe, has been the emergence of powerful new economic theories regarding the ways markets work. The chapter looks at a number of particular issues which may slow any progress towards greater liberalization of aviation in Europe. Europe has a substantial charter market which did not exist on the same scale in the US prior to deregulation.

Europe is not a single market for aviation. There are obvious geographical factors which divide aviation markets across the continent but the primary reason why there is no genuinely single market is institutional. The bodies, agencies and commissions which oversee the regulation and control of the national and international aviation markets which exist within Europe appear as a rather confusing tableau.