Transatlantic aviation deals face inquiry

Date: 04/07/1996

By Tim Jones

FRESH from winning a mandate to negotiate an 'open skies' aviation agreement with the US, the European Commission is trying to extend its powers even further.

Commissioners Neil Kinnock (transport) and Karel Van Miert (competition) announced yesterday (3 July) that six alliances between American and European airlines were to be probed for anti-competitive practices.

Rules preventing majority foreign ownership of airlines both in the EU and the US have pushed companies into strategic alliances which fall short of outright mergers, but share many of their characteristics.

They provide for 'code-sharing' - essentially treating passengers on one airline as those of the partner carrier - but extend to cooperation in marketing, frequent flyer programmes, tariffs and even profit-sharing.

The Commission has been worried about their proliferation for some time, but it took the recent news that British Airways and American Airlines would soon form the world's biggest alliance to spur Van Miert and Kinnock into action.

“We felt we had to go for it now,” said Van Miert. “This alliance was the element needed to convince everyone, at least at the level of the Commission.”

Dusting off the little-known Article 89 of the Treaty of Rome, Commission investigators will request details of the alliances of SAS and Lufthansa with United Airlines, the three separate deals between Delta and Swissair, Sabena and Austrian Airlines and the BA/AA accord.

Article 89 gives the Commission powers to investigate infringements of the EU's competition rules “in cooperation with the competent authorities” in the member states. If it finds that the alliances are abusing or may abuse a dominant position, the Commission can urge changes to the deal and ask the relevant member state to enforce this.

This could include (as with the SAS/Lufthansa tie-up) forcing the ceding of slots or extrication from marketing alliances.

“We are delighted,” said a spokeswoman for Virgin Atlantic, BA's major private sector rival on the lucrative

US-UK routes. Virgin believes the formation of the BA/AA alliance will push down quality, push up prices and create a near monopoly on the New York-London route.

This will be the first time the Commission has exercised jurisdiction over an airline concentration outside the Union's borders. It wants to have powers similar to those used by the US authorities.