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easyJet Challenges Air France and KLM Merger

easyJet has submitted an appeal to the Court of First Instance in Luxembourg, requesting that the Court annul the European Commission’s clearance of the Air France/KLM merger. easyJet wholeheartedly supports the much-needed consolidation of the European airline industry and has long argued that it is unsustainable for each and every country to have its own national airline. It is vital, however, that the interests of consumers come first as consolidation occurs.

French consumers, particularly in Paris, already have to suffer less choice of airlines and higher air fares than elsewhere in Europe, so it was vital that the European Commission did not take any steps that would have resulted in a further drop in competition. Unfortunately, the Commission got it wrong.

easyJet believes that consumer choice will be substantially reduced by the Air France and KLM merger and, given the precedent it is likely to set for all future mergers, the European Commission should not have given its approval for the merger on the following grounds:

* the Commission’s acceptance of remedies proposed by Air France and KLM that manifestly do not restore effective competition on the routes where their services overlap and where they enjoy a dominant position

* the Commission’s failure to consider the impact of the merger on the impregnable dominance of Air France and KLM at their respective hubs in Paris and Amsterdam


* the Commission’s failure to consider KLM as a potential competitor to Air France in the new regulatory environment likely to emerge as a result of the “open skies” negotiations currently taking place between the EU and third countries, notably the US

* the Commission’s failure to support its conclusion that Paris Charles de Gaulle and Paris Orly are substitutable airports for consumers in Paris

* the Commission’s failure to consider the enhancement of the merged airline’s dominance on routes beyond those where the services of Air France and KLM currently overlap

In reviewing the Commission’s clearance of the merger and the justifications it set forth, easyJet was particularly troubled by:

* the Commission’s acceptance of remedies that do not live up to the standards of its own published guidelines, known in legal circles as the “Notice on Remedies”

* the Commission’s failure to assess the merger in accordance with established case-law and precedent

easyJet Chief Executive, Ray Webster, said:

“The Air France and KLM merger can be considered the starting gun for the forthcoming much-needed consolidation of European aviation. easyJet wholeheartedly supports this consolidation - there are far too many national airlines in Europe. However, the interests of consumers must always come first and it is the European Commission’s duty to ensure that this is the case.

“The two main Paris airports (Charles de Gaulle and Orly) are among the most slot-constrained in Europe. Moreover, there are a number of significant barriers to entry that prevent any degree of network competition to Air France. As a result, airfares are higher and consumers have much less choice than in almost any other major market in Europe. The Commission should not have taken any steps that would have had the effect of increasing the dominance of Air France in this hugely constrained market.

“Instead, it is allowing the two airlines to hand over a few slots on a miniscule number of routes. Any airline trying to compete on the Paris to Amsterdam route between the hub airports of these two national airlines without a much wider presence in the market is likely to fail.

“The Commission has a duty, laid out in the Merger Regulation, to take unambiguous action to protect against structural changes that create or strengthen dominant undertakings in the common market. It is clear that, in its current form, the Air France and KLM merger strengthens the dominant position of Air France and would set a worrying precedent for all future consolidation.”