Notice pursuant to Article 5 of Council Regulation (EEC) No 3975/87 of 14 December 1987(1) concerning case COMP/A/38.477/D2

British Airways/SN Brussels Airlines

(2002/C 306/05)

(Text with EEA relevance)

1. The application lodged by British Airways (BA) and SN Brussels Airlines (SN)

By letter of 25 July 2002, BA and SN notified to the Commission a number of cooperation agreements and applied for negative clearance under Article 3(2) of Council Regulation (EEC) No 3975/87 or exemption under Article 5 of the same Regulation.

2. Main content of the agreements

Generally, the parties intend to cooperate across their respective networks in terms of pricing, scheduling and capacity. The parties consider that this cooperation is particularly important on London-Brussels, through which SN passengers will access the BA network from London. The same goes for regional routes between the UK and Brussels, which will give passengers access to SN's African destinations.

In addition to an alliance agreement, which operates as an "umbrella" agreement for general cooperation between them, the parties have concluded the following agreements:

- a code-share agreement which allows each party to place its flight designator code on certain flights operated by the other party. In the first instance, the parties will code share on London-Brussels and they have agreed in principle to code share on other UK-Brussels routes. In the future, the parties may explore the possibility of code sharing on other routes, in particular on "beyond and behind" destinations,

- a revenue apportionment agreement setting out the method of compensation of each airline for carrying each other's passengers on code-shared flights.

The parties are also in the process of negotiating a frequent flyer programme agreement, which will govern reciprocal access to the parties' FFPs and lounges.

3. Arguments invoked by the parties in support of their application

3.1. No appreciable restriction of competition

The parties argue that the alliance agreements will not appreciably restrict competition. The parties' networks and passenger groups are largely complementary and on the key overlap route, London-Brussels, passengers will continue to be able to choose between a variety of travel options, including Eurostar. Rather than eliminating competition, the alliance will increase competition in Europe, as it will enable SN to compete effectively with network alliances (such as Skyteam and Star) and no frills airlines.

3.2. Improvements in the provision of airline services and promotion of economic progress

The parties argue that they have largely complementary networks and customer groups.

Unlike BA, SN does not serve any destinations in America or Asia: its only long haul routes are to destinations in Africa, the majority of which BA has been unable to serve itself. SN is a "full service" airline, which is not part of an alliance. SN needs to offer its passengers access to a global long haul network and BA is able to offer this in particular through its hub at London-Heathrow. SN's customer base in Brussels will also provide valuable feed to BA's network, thereby improving its efficiency.

3.3. Consumers will share the benefits from the cooperation agreement

According to the parties, the alliance will benefit passenger transport in the following areas:

- wider choice of destinations and connections: by being able to access BA's network, SN passengers will have a wider choice of travel options at competitive prices. They will also be able to use BA's offices worldwide to obtain tickets and information. BA's passengers will gain easier access to SN's African destinations which BA has been unable to serve itself,

- code share: code sharing with BA on UK-Brussels routes will allow SN to offer its passengers an improved service in terms of quality, seating comfort, meal choice, etc.,

- better scheduling: the alliance will provide the necessary financial incentives for BA and SN to improve schedules on UK-Brussels routes, reducing elapsed times for connecting flights from the UK to destinations in the BA network and from Brussels to SN's African destinations,

- co-location and signage: the parties will also coordinate gate allocation and ground services to offer swift connections at Brussels national airport and London-Heathrow. Passengers on code-share flights will benefit from shorter transfer times and reduced connecting times, more efficient check-in and improved ground handling,

- benefits derived from frequent-flyer programmes: the parties will put in place arrangements to allow SN and BA members to "earn and burn" miles on each other's flights. They also intend to explore the possibilities of sharing customer profile information, including seating preferences, tier status and frequent flyer activity, to provide passengers with superior service,

- improved ticketing: the parties will work together to introduce reciprocal ticketing to each other's passengers and to integrate their systems. As a consequence, BA agents will be able to provide prompt and complete ticketing services to a passenger who has been issued a ticket by SN (and conversely). Passengers on restricted tickets will also be able to make and pay for any change in their tickets at any BA or SN point of sale,

- reciprocal lounge products: where practicable, the parties will introduce reciprocal lounge access.

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

The parties argue that the alliance is necessary in order for SN to be able to offer its passengers the benefits of a global long haul network.

The parties argue that they need to cooperate across their respective networks in terms of pricing, scheduling and capacity to react dynamically to challenges in the market place, allowing passengers to benefit fully from an improved service on the combined networks.

Fully fledged cooperation on Brussels-London is essential to enable the parties to offer sufficient inventory to connecting passengers at attractive fares, and therefore ensure SN passengers' access to BA worldwide network. Cooperation on regional UK-Brussels routes is equally indispensable to optimise access for UK passengers to SN's African and European destinations.

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

The parties consider that the alliance agreements do not eliminate competition. On the key London-Brussels route, passengers will continue to be able to choose between a variety of travel options, including Eurostar. Rather than eliminating competition, the alliance will increase competition in Europe, as it will enable SN to compete effectively with network alliances (such as Skyteam and Star) and no frills airlines.

4. Conclusion

The Commission has established prima facie that the agreements in question are caught by Article 81(1) of the Treaty, but it has not taken a position as to the applicability of Article 81(3). In accordance with Article 5 of Regulation (EEC) No 3975/87, the Commission invites interested parties to send their comments concerning the cooperation agreement between BA and SN, within 30 days of the date of publication of this notice, to: European Commission Directorate-General for Competition

Unit D2 (Transport)

Office J-70 2/236 B - 1049 Brussels Fax (32-2) 296 98 12 e-mail: Christine.Tomboy@cec.eu.int

(1) OJ L 374, 31.12.1987, p. 1.