EC launches probe into major airlines

21st Apr 2009

The European Commission has launched an investigation into seven international airlines - including British Airways, Air France-KLM,
and Lufthansa
and American Airlines - over possible anti-competitive practices on transatlantic routes that it fears could be harmful to consumers.
The first is looking into the cooperation between Star Alliance carriers Air Canada, Lufthansa, United and prospective member Continental; and the second is into British Airways, Iberia and American Airlines under their oneworld code-sharing.
These come in addition to an existing investigation already looking at the Skyteam alliance of Air France-KLM and Delta-Northwest.

BA has already submitted documents to the United States Department of Transport seeking antitrust immunity for its proposed tie-up with American Airlines. It believes that cost-saving opportunities from closer co-operation will be important as it attempts to weather the downturn in the aviation sector.

Alliances discovered to have engaged in anti-competitive behaviour can be fined up to 10 percent of global turnover, and any further co-operation be banned.

BA has already made public its intentions to seek further co-operation with AA in a bid to thwart the global downturn. It had hoped to complete its deal this year but previous European antitrust investigations have taken two years to complete.

The partnership would see the two airlines setting capacity and fares on transatlantic routes. They would also share costs and revenues from their joint operations along with Iberia.


Star Alliance members have already received US regulatory approval to establish a similar cost-sharing network.

The Commission told The Times: “The level of co-operation appears far more extensive than the general co-operation between these airlines and other airlines, which are part of the Star and oneworld alliances. The Commission is assessing whether these joint activities may lead to restrictions of competition on certain transatlantic routes.”

A spokesman for BA said: “We believe that the EU-US market is highly competitive with 42 airlines competing non-stop between the two areas. Our joint business agreement would give consumers more choice with a wider network, access to cheaper fares, better connections and more frequent-flyer rewards.”

BA and AA have twice before had their merger attempts rebuffed. However this time chief executive Willie Walsh is arguing that an unprecedented bleak economic outlooks means merger is essential for survival.


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