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Airline Block Exemptions Come Under EC Scrutiny

by Ulrika Lomas, for, Brussels

05 October 2006

The European Commission has this week adopted a Block Exemption Regulation revising the exemption International Air Transport Association (IATA) passenger tariff conferences have enjoyed from the EC Treaty’s ban on restrictive business practices.

For routes within the EU, tariff conferences will no longer be exempted as of 1 January 2007. The Regulation exempts tariff conferences on routes between the EU and the US or Australia until 30 June 2007, and routes between the EU and other non-EU countries until 31 October 2007.

However, airlines benefiting from the block exemption on routes between EU and non-EU countries must provide the Commission with data on interlining to allow the Commission to consider whether the exemption for those routes should be extended beyond those dates. The new Regulation will also end the block exemption for IATA slots and scheduling conferences.

Competition Commissioner Neelie Kroes announced that:

“IATA passenger tariff conferences appear to facilitate interlining on routes to third countries, but I do not have sufficient assurances that they continue to benefit passengers on journeys within the EU. The possible prolongation beyond 2007 of the exemption for tariff conferences on routes to non-EU countries depends on the provision of data showing that IATA interlining continues to benefit consumers.”

Interlining occurs when a passenger flies with the same ticket with two or more carriers, and allows consumers to combine the services of different airlines and makes multi-carrier journeys seamless: at a transit airport, passengers do not have to collect their luggage and check in again and their baggage will automatically follow through to their final destination.

The IATA interlining system is one of four types of interlining systems that exist, the others being global airline alliances, code-share agreements and bilateral interlining agreements. IATA interlining operates at prices agreed by all airlines together in the IATA tariff conferences.

The new Block Exemption Regulation was adopted after extensive consultations with industry, trade and consumer organisations, and national authorities.

The American and Australian authorities are reviewing IATA’s exemptions for tariff conferences under their respective competition rules and should have taken first decisions by June 2007. It is therefore appropriate that the Commission reviews the situation within the same timeframe.

According to an EC statement:

"IATA and its member airlines appear to be actively working towards the development of an alternative system to replace tariff conferences. The Commission welcomes this initiative provided that it helps preserve the benefits of IATA interlining for consumers whilst addressing the Commission’s competition concerns."

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