Lufthansa Resists Official Pricing Dictate

Cartel Office lapsing into national provincialism
Lufthansa is to seek legal redress against the Cartel Office`s announced plans to prohibit its current fares on the Frankfurt-Berlin route. “It is grotesque that a German authority should lapse into national provincialism only four weeks after the launch of the euro,” said Lufthansa Executive Vice President Network Management and Sales Ralf Teckentrup in Frankfurt.   
By solely considering a single route in total isolation in the German route network, the Federal Cartel Office is misjudging the real competitive situation in air traffic. It is actually in cross-border networks in Europe that liberalised competition between airlines and airline alliances is taking place. The success that can be earned there is evidenced by low-cost carriers with constant annual growth rates of between 30 and 40 per cent. Moreover, the Cartel Office is ignoring competition from road and rail traffic on the Berlin-Frankfurt route.
The Cartel Office complained that Lufthansa fares are too low in competition with the Germania airline on the Berlin-Frankfurt route and demanded that they be raised to a consistent 40 euros instead of the present five euros above the price charged by its competitor airline. That is warranted by Lufthansa`s product benefits such as inflight service, its Miles & More frequent flyer programme and its greater flight frequency on the route, the Office said.

Back in December last year, Lufthansa submitted extensive documentation on its pricing policy. Subsequent talks were conducted in January in a bid to reach an acceptable compromise. The Cartel Office has nevertheless seen fit to to issue an injunction against the airline`s pricing measures. Years earlier in 1997, the Office intervened in Lufthansa`s pricing policy by fixing a maximum price for the Berlin - Frankfurt route. That case is still pending.

“Since Lufthansa alone is operating with 1.5 million fares in a fully liberalised market, it is inacceptable that the Cartel Office should act as a regulatory body on just a single tariff. That would be tantamount to revoking air traffic liberalisation, said Teckentrup. He underlined that the fare complained about is only one of many on the route. Decisive, however, for a route`s profitability is the sum of all revenues from operating on it.