UPDATE: EU Opens Antitrust Cases Into Airline Cooperation
20 April 2009 - 10:20PM
Dow Jones News
The European Union Commission said Monday it has launched two
antitrust cases looking into airline cooperation on transatlantic
routes that could constitute an illegal cartel.
It said it suspects that airlines under the broader Star
Alliance and Oneworld Alliance banners have cooperated too closely
on prices and capacity.
The first investigation concerns both existing and planned
cooperation between members of the Star Alliance group - Air Canada
(AC.A), Continental Airlines (CAL), Deutsche Lufthansa (LHA.XE) and
United Airlines (UAUA).
The second investigation is into proposed deals between three
members of the Oneworld Alliance - American Airlines (AMR), British
Airways (BAY.LN) and Iberia (IBLA.MC).
The level of cooperation between the two groupings of airlines
"appears far more extensive than the general cooperation between
these airlines and other airlines which are part of the Star and
Oneworld alliances," the commission said.
The agreements that prompted the European Commission's scrutiny
allow the airlines to coordinate their commercial, marketing and
operational activities on routes between the European Union and
North America.
The commission said it is concerned the airlines' plans to
jointly manage schedules, capacity, pricing and revenue on
transatlantic routes may lead to reduced competition on the
routes.
In the U.S., the alliances have recently come under scrutiny
from the House of Representatives transportation committee, which
is proposing a bill that would unwind the existing system of global
alliances.
Committee Chairman Rep. James Oberstar has said the alliances
have become too dominant in the marketplace, with too much control
over passenger fares.
In the U.S., airline alliances can apply for antitrust immunity
that protects them from regulators. Star Alliance currently enjoys
such immunity for some of the partners to jointly set prices and
schedules across the Atlantic.
But the probe is likely to prove tricky for Continental
Airlines, which is in the process of switching from rival alliance
SkyTeam to Star and needs renewed antitrust immunity to work more
closely with United.
Oneworld Alliance, the smallest of the three groupings that
dominate transatlantic flights, is also trying to win immunity in
the U.S.
"This is a normal part of the E.U. process of examining our
antitrust immunity application with American Airlines and Iberia,"
British Airways (BAY.LN) said in an emailed statement.
However, the commission's antitrust spokesman Jonathan Todd said
it was misleading to call the investigation a routine
inspection.
We are investigating this as a matter of priority to "assess
whether there is a violation of antitrust rules," Todd added.
If found guilty, the commission can fine the companies up to 10%
of their global revenue and demand they make changes to their
business practices.
-By Peppi Kiviniemi, Dow Jones Newswires; +32 (0)2 741 1483;
peppi.kiviniemi@dowjones.com