Airlines urged to find solutions for competition fears

Date: 12/06/1997

By Tim Jones

THE arrival of a new government in the UK has markedly improved the chances that regulators will be able to rule on the controversial alliance between British Airways and American Airlines soon after the summer break, according to Competition Commissioner Karel van Miert.

This will come as welcome news to BA chief executive Bob Ayling, who warned this week that continued regulatory delays could kill the deal.

Two weeks after meeting UK Trade and Industry Minister Margaret Beckett, the Commissioner said he was increasingly hopeful that solutions could be found to prevent the merger from stifling competition.

“She must have time to sort things out for herself, but I got the impression that there is a more positive environment regarding cooperation between the government and the Commission,” he told European Voice. “More than that, BA seems keener to talk to the Commission than it was before.”

Van Miert intends to present the advisory committee on competition policy, made up of national anti-trust officials, with his preliminary findings on the deal next month. “In the meantime, there is nothing to stop the companies from coming up with solutions,” he said.

Since he announced his intention to investigate the BA/AA alliance in July last year, Van Miert has fought an uphill battle with both the firms and the previous UK administration to prove he has any right to interfere in the case.

For the first time, the European Commission is exercising jurisdiction over an airline concentration outside the Union under the little-known Article 89 of the Treaty of Rome.

This allows Van Miert to investigate violations of the EU's competition rules “in cooperation with the competent authorities” in a member state, but he has no direct powers to enforce his will.

This could continue to be a problem as Beckett is still following the advice of the UK's office of fair trading (OFT), which handed her new counsel only three weeks ago, rather than that of the Commission's competition investigators.

In December, the OFT said the alliance could go ahead as long as the two airlines shed the equivalent of 90&percent; of the take-off and landing 'slots' that AA would bring to the merger.

The OFT is negotiating with the airlines to give up 168 weekly slots (the equivalent of 12 round trips per day) of which 70 should be permanently released for the winter season and a further 28 for next summer. Another 70 weekly slots should then be leased out, but these could revert to the alliance as other airlines gained access to Heathrow through normal slot allocation.

Of the US carriers, only AA and United Airlines now have Heathrow slots.

Continental, Delta, TWA and USAir all want to get into the world's biggest international airport to provide services from their regional US hubs.

But the government says the companies should reduce their services on the London-Boston and London-Dallas Fort Worth routes if a new airline wants to get into that market.

Although Van Miert is said to have toned down his demand that 400 weekly slots (or 28 daily round trips) should be shed, he remains adamant that the firms should give away rather than sell their slots.

Final decisions are still some way off. Under Article 89, the Commission must put its position to the advisory committee, look for remedies from the companies then return to the committee. “It is rather a long procedure,” said Van Miert. “It is up to the companies to come up with solutions. We will have to see whether they are prepared to offer remedies that will meet with our concerns. It is now in their hands.”