WRITTEN QUESTION E-0030/02

by Doris Pack (PPE-DE) to the Commission

(21 January 2002)

Subject: Air transport: compatibility of alliances with competition

1. What is the Commission's appraisal, in terms of safeguarding competition, of the agreements on price-fixing and terms and conditions between European and non-European airlines within what are termed alliances?

2. Does such cooperation, in the Commission's view, hinder or foster competition?

3. As regards consumers/passengers, what impact does the Commission expect such arrangements to have on air fares now and in the future?

4. What is the Commission's appraisal of the agreements entered into by airlines to pay commission to travel agencies or IATA agents?

5. Are such agreements on price-fixing and terms and conditions which involve the payment of commission compatible with EU competition law?

Answer given by Mr Monti on behalf of the Commission

(8 March 2002)

1. Alliances between airlines may take different forms and involve different degrees of co-operation and will have to be assessed on a case-by-case basis. In so far as alliances involve co-operation on key elements where airlines normally compete, such as joint pricing, schedule co-ordination, capacity and revenue sharing, they may give rise to competition concerns where the alliance partners were prior to the alliance actual or potential competitors. Such alliances can only be authorised under the Community competition rules if the alliance partners can demonstrate that the restrictive effects on competition are outweighed by the benefits achieved by the alliance. Moreover, it should be established that consumers share in these benefits, that they could not be obtained by less restrictive alternatives and that competition is not eliminated.

These principles apply both to intra-Community alliances and to alliances between European and non-European airlines. The procedural framework is however different since Council Regulation (EEC) No 3975/87 of 14 December 1997, laying down the procedure for the application of the rules on competition to undertakings in the air transport sector(1) only covers air transport between European Economic Area (EEA) airports. Alliances between European and non European airlines can be examined under the transitional provision of Article 85 of the EC Treaty, which allow the Commission to propose appropriate measures to bring infringements to an end and to authorise Member States to take the necessary measures to remedy the situation. Under this provision the Commission is currently examining some transatlantic alliances as to their compatibility with Community competition law.

2. From a competition point of view, the Commission is not opposed to the formation of alliances as such. The Commission acknowledges that alliances can lead to important efficiencies. For that reason, the Commission has given in the past an approval to such alliances once remedies had been found to address competition concerns.

3. The impact of alliances on passenger fares will have to be assessed on a case by case basis and is difficult to predict. Increased efficiencies and cost reductions should normally result in lower prices. However, benefits of alliances for consumers may also be achieved in terms of increased capacity and frequencies etc.

4. and 5. Agreements between airlines on the commissions to be paid to travel agents would in principle amount to a resale price agreement between competitors, prohibited by Article 81(1) of the EC Treaty. Airlines used to agree on a recommended level of commission to travel agents, in the context of the International Air Transport Association (IATA). The latter has informed the Commission that all related resolutions expired in April 2001.

(1) OJ L 374, 31.12.1987.