EU launches anti-trust probe of airlines

21st April 2009, Comments 0 comments

The European Commission launched a probe on Monday into pacts between airlines in two major alliances on suspicion the deals might constitute restrictive business practices on transatlantic routes.

Brussels --

One inquiry concerns existing and planned cooperation between four current or prospective members of the Star Alliance -- Air Canada, Continental, Lufthansa and United, the EU's top competition regulator said in a statement.

The second involves proposed cooperation between three members of the Oneworld alliance -- American Airlines, British Airways and Iberia of Spain.

"We think that there may be breaches of the anti-trust rules because of the very extensive levels of cooperation on transatlantic routes between these airlines," said competition issues spokesman Jonathan Todd.

"We are opening a formal anti-trust investigation. We would not do that unless we thought there was good reason to pursue this," he added.

Star Alliance was built in 1997 around German flag carrier Lufthansa, while Oneworld formed two years later, with British Airways at its centre. A third alliance, SkyTeam, was launched in 2000 around Air France.

Companies benefit by harmonising flight times for smoother transit connections and having the possibility to sell seats on a partner airline under their own name.

Consumers can collect travel points leading to free tickets or goods.

Brussels said it was investigating whether the agreements between the seven companies would mean too much cooperation between them, mainly on routes between the EU and North America.

"In particular, the parties to each agreement intend to jointly manage schedules, capacity, pricing and revenue management on transatlantic routes, as well as share revenues and sell tickets on these routes without preference between these carriers," the commission noted.

"The commission is assessing whether these joint activities may lead to restrictions of competition on certain transatlantic routes."

The Star Alliance probe covers existing transatlantic cooperation between Lufthansa and United, and between Lufthansa and Air Canada, as well as a proposed four-party agreement between them and Continental.

The commission said the probes, for which no deadlines for completion have been set, do not imply that it has conclusive proof about any infringement but did mean that the cases would be given priority treatment.

Todd said the commission was not focusing on how high transatlantic ticket prices are but rather on the level of cooperation that was taking place between the companies.

"Any kind of price fixing is potentially in breach of (EU) rules on restrictive business practices, unless there are clear benefits to consumers," he told reporters.

"We will be looking in particular at whether there are benefits."

If found guilty, the companies could be ordered to take corrective action or face fines of up to 10 percent of their global turnover, Todd said.

A spokesman for Lufthansa said the German flag carrier had been warned of the investigation and that it was cooperating fully.

"It's a normal procedure," he said. "We have had constructive exchanges with the European Commission. We are providing the information that it's asking for."

However, Todd said the probes were anything but routine.

"The European Commission doesn't open anti-trust investigations on a routine basis," he said.

Lufthansa has come under the commission's microscope recently over its ongoing purchase of Austrian Airlines and the German carrier's plans to buy into Brussels Airlines.


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