EC Probes Oneworld Alliance

by Mike Godfrey, Tax-News.com, Washington

10 March 2010

The European Commission has invited comments from interest parties on commitments proposed by British Airways, American Airlines and Iberia to address anti-trust concerns that their planned alliance may harm consumers on transatlantic routers.

In September 2009, the Commission sent a Statement of Objections to the three airlines expressing concerns that their extensive cooperation, which involves revenue-sharing and joint management of schedules, pricing and capacity, may be in breach of EU anti-trust rules. The parties have notably offered to make landing and take off slots available at London Heathrow, London Gatwick and/or New York John F. Kennedy airports to facilitate entry of competitors on routes to New York, Boston, Dallas and Miami. If the market test confirms that the proposed commitments remedy the competition concerns, the Commission may adopt a decision making the commitments legally binding on the parties.

In April 2009, the Commission opened a formal investigation into the cooperation of oneworld alliance members British Airways, American Airlines and Iberia on passenger transport on routes between Europe and North America. It sent a Statement of Objections to the parties on September 29, 2009, taking the view that the agreement may be in breach of EU rules on anti-competitive business practices (Article 101 of the Treaty on the Functioning of the European Union). British Airways, American Airlines and Iberia jointly offered a set of commitments in order to alleviate the Commission's competition concerns.

The commitments proposed by the parties are primarily aimed at enabling competing airlines to start operating on the affected routes by lowering barriers to entry. Concretely, they offer to make available landing and take-off slots at London Heathrow or London Gatwick airports on routes to Boston, New York, Dallas and Miami. On the London-New York city pair, the parties also propose to provide the competitor with operating authorizations at New York JFK airport.

In addition, British Airways, American Airlines and Iberia undertake to provide access to their frequent flyer programmes on the relevant routes, allowing passengers of the qualified new entrants to accrue and redeem miles on the parties' frequent flyer programmes.

The parties also propose to allow fare combintions and offer special prorate agreements in relation to the routes of concern, which would enable competitors to offer tickets on the parties' flights and facilitate access to connecting traffic. Finally, the parties commit to regularly submit data concerning their cooperation, which would facilitate an evaluation of the alliance's impact on the markets over time. To monitor the implementation of the commitments, a trustee would be appointed.

Throughout its investigation the Commission has been in close contact with the US Department of Transportation, which is conducting a parallel review under US rules.

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