Transport: Provisional settlement of airline alliances appears on the horizon 2

United Kingdom

The Commission has published its preliminary opinion on the agreement between British Airways (BA) and American Airlines Inc (AA), aimed at establishing a world-wide alliance. The Commission's provisional view is that the agreement in its entirety restricts competition contrary to Article 85 of the EC Treaty. Furthermore, as far as the hub-to-hub routes are concerned (between centres for connecting flights), the Commission considers that the alliance is an abuse of the parties' dominant position contrary to Article 86 of the Treaty. This dominant position of the two companies could restrict the ability of competitors to enter the market, especially on the routes between London-Dallas, London-Miami and London-Chicago.

The Commission therefore intends to attach a number of conditions to its approval of the alliance:

  • Where BA/AA carry 120,000 passengers or more a year and operate more than 12 frequencies a week, they must reduce their services if requested by a competitor in the six months after authorisation of the deal.

  • The alliance must give up airport slots in London where a rival wishes to launch or expand a service. These conditions would release a maximum of 267 slots, to be given up without compensation. They would also have to give up airport facilities needed to use the slots effectively.

  • Other conditions relate to reservation systems, frequent flyer programmes, relations with travel agencies/corporate customers and interlining.

The Commission has also given its preliminary opinion on the alliance between Lufthansa, SAS and United Airlines. The Commission considers that the alliance, without conditions, restricts competition contrary to Article 85 of the Treaty. The Commission is concerned that the alliance would create significant barriers for entry to the market. The opinion relates to the transport of passengers and not the transport of goods.

The Commission has consequently set out the following conditions to which approval of the agreement is subject:

  • on the routes Frankfurt-Washington and Frankfurt-Chicago, where the total annual traffic is 120,000 passengers or more a year and the frequencies are more than 12 a week, the parties must reduce their weekly frequencies if requested by a competitor in the six months after authorisation of the deal.

  • Lufthansa/SAS must make available the necessary slots in Frankfurt and Copenhagen where a rival wishes to launch or expand a service. The maximum number of slots to be released amounts to 108. If necessary, the companies must also give up airport facilities needed to use the slots effectively.

  • Other conditions relate to reservation systems, frequent flyer programmes, relations with travel agencies/corporate customers and interlining.

The German competition authority has also opened its own procedure to examine the alliance.