As a result, average fares fell in real terms and demand for airline service doubled over a decade after deregulation policy was introduced (Funck & Ghannad, 1999). Further more deregulation policy enabled the airline to enter partnerships and Star Alliances to develop globally. Privatisation of national airlines, liberalization of investment restrictions on national airlines and liberal landing rights are a few opportunities arising as a result of deregulation. Threats are also inevitable. More liberal policies result in higher competition and lower prices, which has made the industry illiberal and risky. .
Economic Factors.
The European airline industry is a competitive industry, which is closely linked to the performance of the overall European economy. The demand for air services is derived from the demand for the products of business and leisure activities. A community's rising level of income stimulates the demand for air travel in two main ways, a rise in private disposable incomes leads to higher expenditure on leisure travel and higher economic activity increases the demand for business travel. Further more the worldwide demand for air travel has grown much faster than GDP, both because of rising incomes and a decline in the real costs of air travel. There are several other points that are briefly discussed below. .
Exchange Rate.
The demand for travel is sensitive to changes in costs induced by changes in the exchange rate. An international airline typically earns a large proportion of its revenue, and incurs a large proportion of its cost, in its own national currency. So when exchange rates fluctuate this can have a significant impact upon an airline's profit and loss situation. Airlines in countries with "hard," appreciating currencies are disadvantaged by a rise in the exchange value of their national currencies, while the opposite is the case for airlines based in countries with "soft" depreciating, currencies.