Notice pursuant to Article 5 of Regulation (EEC) No 3975/87 of 14 December 1987 concerning case IV/37.749 - Austrian Airlines Österreichische Luftverkehrs AG and Scandinavian Airlines System

(2000/C 193/06)

(Text with EEA relevance)

I. THE APPLICATION LODGED BY SCANDINAVIAN AIRLINES SYSTEM (SAS) AND AUSTRIAN AIRLINES (AUA)

On 30 December 1999, Austrian Airlines and Scandinavian Airlines System notified a cooperation agreement pursuant to Article 5 of Council Regulation (EEC) No 3975/87 for a decision applying Article 81(3) of the EC Treaty and Article 53(3) of the EEA Agreement to the alliance concluded between them.

II. PROVISIONS OF THE AGREEMENT

The cooperation agreement and its implementing agreements are regarded as a step for the Austrian Airlines Group to join the STAR alliance. The parties envisage to cooperate in several areas such as generally applicable service standards, network cooperation, the establishment of a joint traffic system, code sharing, fares and special pro-rates, marketing and sales, frequent flyer programme, airport facilities, cargo services and other areas in which both parties have a mutual interest.

The worldwide cooperation includes a joint planning of schedules in order to maximise hub feed, the coordination of pricing policies, route programs and capacity. Services shall be provided on equal terms to passengers on code shared flights or joint traffic system (JTS) flights. The most far reaching cooperation has been agreed on the traffic between Austria and the nordic countries (Norway, Sweden and Denmark). The JTS applies to all air transport services between Austria and the nordic countries for which the parties share profits and losses. Any joint traffic flight shall be operated as a code-shared flight.

III. REASONS FOR EXEMPTION

The parties have put forth the following arguments in support of the application of Article 81(3):

1. Improvements in the provision of airlines services and promotion of economic progress

According to the parties their networks are mainly complementary with the exception of the Austria-nordic countries market. By integrating their networks, the parties expect to create a more extensive European network which will, in particular, lead to a better connection with eastern European countries. The combination of both networks will create new connections likely to generate an increase in demand. By coordinating their networks, they expect to improve the production and distribution of their air and ground services in terms of more efficient use of the combined resources.

The parties put forward that the cooperation agreement will lead to cost reductions by attracting more passengers and thus take advantage of economies of scale, better organisation of distribution systems and ground services and the joint development of cost intensive production and distribution methods.

2. Consumers will share the benefits from the cooperation agreement

The parties argue that customers would benefit from the creation of a more extensive network by getting access to a range of improved services. Improved services can be expected from a better coordination of flight schdules, an increased number of flights and transfer connections, shorter waiting time, no need to move between terminals, harmonised service standards on the plane and for ground-handling. Cost reductions would lead to lower fares. The parties also argue that consumers will benefit indirectly in terms of a more environment-friendly use of resources due to the cooperation.

3. The cooperation agreement does not impose on the parties restrictions which are not indispensable to the attainment of the objectives of the agreement

According to the parties the establishment of a larger European network requires an extensive cooperation between the two airlines. The goal of operating as a single integrated network could not be achieved if the parties retained the ability to compete for traffic between Austria and the nordic countries. The envisaged cost reductions require a substantial pooling of material and of human and financial resources. According to the parties, a mere code-sharing, or interlining agreement would not be sufficient to achieve these gains, as it would not allow to optimise the use of planes and thereby the flight schedules.

4. The cooperation agreement does not afford the parties the opportunity of eliminating competition in respect of a substantial part of any market

The parties have put forward that the structural effects of the cooperation agreement are limited, given the limited overlap between parties' networks, the importance of transfer passengers and actual and potential competition. They claim not to be in a position to eliminate competition of a substantial part of traffic between Austria and the nordic countries or of the traffic to third countries. To the contrary, the cooperation agreement will lead to an increase in competition between different alliances. By improving their offer of transport services and their ability to adapt prices in a coordinated way, the parties will force other alliances to make similar improvements to the benefit of their customers.

IV. CONCLUSION

The Commission, having established prima facie that the agreement in question meets the test of Article 81(1) of the EC Treaty; has not taken a position as to the applicability of Article 81(3). In accordance with Article 5 of Council Regulation (EEC) No 3975/87, the Commission invites interested parties to send their comments concerning the cooperation agreement between AUA and SAS, within 30 days of the date of publication of this notice, to: European Commission , Directorate-General for Competition , For the attention of Oliver Stehmann , Unit IV/D2 , Office C 100 - 6/134,

Rue de la Loi/Wetstraat 200,

B - 1049 Brussels , fax (32-2) 296 29 11 , e-mail: Oliver.Stehmann@cec.eu.int