WRITTEN QUESTION E-2204/99

by Olivier Dupuis (TDI) to the Commission

(29 November 1999)

Subject: Agreements in the air transport sector and compliance with competition rules

In recent years, the Commission has been involved in analysing and regulating certain agreements between airlines in order to safeguard openness and competition on the markets in

question. To this end, in the case of the alliances between British Airways and American Airlines, Lufthansa and United Airlines and KLM and Alitalia, the Commission has imposed very tough conditions on the airlines in order that these agreements may be considered as compatible with Community law.

Conversely, other agreements between airlines, although of a different nature, have received less attention or have simply been neglected. This seems to be the case, for example, with the code-share agreement between Sabena and Virgin Express on the Brussels-Rome route despite the fact that the immediate effect of this agreement was to reduce the number of competitors and frequencies on that route.

Does the Commission not consider that this agreement reduces competition and, consequently, the benefits to consumers in terms of quantity, quality and cost of the service?

More generally, what steps is it planning to take to counteract the anticompetitive effects of code-share practices as well as the lack of transparency and information for travellers which these practices may involve?

Answer given by Mr Monti on behalf of the Commission

(14 January 2000)

Through a code-sharing agreement, an airline can sell its tickets (using its own designator code) on a flight operated by another airline. The flight is then identified by the designator codes of both airlines. Such agreements are increasingly used by airlines, both inside and outside the Community. The Commission estimates that the fifteen largest Community airlines have concluded over 150 code-sharing agreements.

Since 1996, when a study on code-sharing was prepared for the Commission, the Commission has taken action to improve the transparency of these arrangements and ensure that passengers are better informed. Council Regulation (EC) No 323/1999 of 8 February 1999 amending Regulation (EC) No 2299/89 on a code of conduct for computer reservation systems (CRSs)(1) now foresees that, in case of code-sharing, the actual operator of a flight must be clearly identified at the time a reservation is being made. This provision ensures that a passenger who buys a ticket with an airline X is informed from the outset that he will actually be flying with airline Y.

The compatibility of a code-sharing agreement with competition law depends on the contents of the agreement and on the route or routes affected by it. Certain code-sharing agreements have the potential to be pro-competitive. By lowering costs and increasing efficiency, a code-sharing agreement may for example contribute to maintaining service on a low-density route or establish a new route. Other code-sharing agreements can be anti-competitive because they may result in market sharing or prevent competitors from entering the market.

Code-sharing agreements must therefore be examined on a case-by-case basis. The Commission is at present examining different types of code-share, notably agreements between flag carriers relating to the route that links their respective hubs.

The Commission has not received any complaint regarding the code-sharing agreement between Sabena and Virgin Express on the Brussels-Rome route (where Alitalia also operates). However, while the enquiries now being carried out on other routes will help clarify which types of code-sharing agreements are acceptable and which are not, the Honourable Member is welcome to provide to the Commission any evidence in his possession which may show that competition on the Brussels-Rome route has been restricted.

(1) OJ L 40, 13.2.1999.