2nd UPDATE: EU Opens Antitrust Cases Into Airline Cooperation
21 April 2009 - 12:58AM
Dow Jones News
The European Union Commission said Monday it has opened two
separate antitrust probes into seven airlines on suspicion that
they may have operated an illegal cartel on transatlantic
routes.
It said it suspects that some 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 the
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.
The airline alliances have traditionally been accepted by the
regulators on both sides of the Atlantic as a certain amount of
cooperation brings increased benefits to consumers in terms of more
flexible routes and scheduling, and joint ventures were often
impossible on nationalistic grounds.
However many travel groups complain that the recent scope of
immunity granted in the U.S. to the alliances is too broad allowing
the airlines to operate a pricing cartel.
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.
The investigation comes a year after the "Open Skies" agreement
between the European Union and U.S., which aimed to enable more
airlines to start transatlantic routes
"This is a normal part of the E.U. process of examining our
antitrust immunity application with American Airlines and Iberia,"
British Airways said in a 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.
Iberia said that the airlines were waiting for the approval from
Brussels before starting more intensive cooperation.
Lufthansa spokesman said the company is in "constructive talks"
with the European Commission, but that it will stick to its plans
to implement the cooperation with its Star Alliance partners as
quickly as possible, despite the investigation launched by the E.U.
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