EU Grants Austrian and Lufthansa Permission

On July 5 2002, the European Commission granted its official approval to the co-operation arrangement between the Austrian Airlines Group and Lufthansa. This approval of the co-operation between the two partners initially extends for a period of six years from the time of application with the EU Commission, i.e. until December 2005.

The partners first registered their application for the indemnification of their co-operation with the European Commission in December 1999. Following the publication of the application in July 2000 and a period for major clients and competitors to lodge comments, the competition authority initially stated in October 2000 that the co-operation could not be indemnified without restrictions. From May 2001 onwards, Lufthansa and the Austrian Airlines Group entered into intense discussions with the EU competition authorities over the conditions that would be expected to be accepted. On 14 December 2001 the EU Commission published the negotiated package of conditions, signalling that the co-operation would be approved when these conditions were observed. Following confirmation from the Consultative Committee of the member states in May 2002, the airline co-operation has now been granted official approval as of July 5, 2002.

The co-operation between the Austrian Airlines Group and Lufthansa has been approved, on condition that both sides observe certain restrictions in competition law.
These include the condition that, on demand, both partners make up to 40 % of their slots available to competitors free of charge on the respective Austria-Germany route. The partners are also obliged, where a competitor enters a route, not to increase their number of frequencies on this route for a period of two years.

The close co-operation between the two Star Alliance partners makes it possible to provide flight schedules precisely and according to demand. The co-operation also guarantees the shortest possible connection times, closely situated departure gates and mutual ticket acceptance by the airlines. The convenience and comfort of being able to use mutual lounges and the ability to earn and spend miles on Miles & More, the largest European frequent flyer programme, represent further customer benefits that will result from the co-operation between the Austrian Airlines Group and Lufthansa in the organisation of their regional traffic between Austria and Germany.

Vagn Soerensen, Chief Executive Officer of the Austrian Airlines Group, had the following to say on the official announcement of the co-operation approval: “We are satisfied, that the European Commission now officially approved our co-operation, as the co-operation generates numerous benefits for our customers! The conditions of the EU competition authority may be hard, but if they serve to guarantee fair competition, then we must accept this. We fully expect the EU to apply the same measures from now on to other comparable cases in the aviation industry. Identical conditions of competition are absolutely essential to ensure the fair development of all market participants, particularly in an industry as highly competitive as aviation.”