Notice pursuant to Article 5 of Council Regulation (EEC) No 3975/87 of 14 December 1987 concerning case COMP/38.712 — British Midland Ltd/Deutsche Lufthansa AG/Scandinavian Airlines System (Text with EEA relevance)
Date: 2001-03-14
Institutions: European Commission
Subjects: European Commission, air transport, cooperation agreement, joint venture, merger control

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14.3.2001

Notice pursuant to Article 5 of Council Regulation (EEC) No 3975/87 of 14 December 1987
concerning case COMP/38.712 (cid:151) British Midland Ltd/Deutsche Lufthansa AG/Scandinavian
Airlines System

(2001/C 83/03)

(Text with EEA relevance)

I. The application lodged by British Midland (BD)/
Deutsche Lufthansa AG (Lufthansa) and Scandinavian
Airlines System (SAS)

On 9 November 1999, British Midland, Lufthansa and SAS
concluded a tripartite joint venture agreement ((cid:145)TPJVA(cid:146)). This
agreement was notified to the European Commission on 1
March 2000 in accordance with Regulation (EEC) No
3975/87 for a decision applying Article 81(3) of
the EC
Treaty and Article 53(3) of the EEA Agreement.

standards and in-flight amenities where commercially and
technically practical and agree, where commercially and
to share facilities and services at
logistically reasonable,
airports served within the framework of the TPJVA.
In the
field of ground handling, each party agrees to do the ground
handling for the other partners at its (cid:145)home(cid:146) airports. Finally,
the TPJVA also provides for the sharing of profits and losses
made by the services operated under the TPJVA according to a
set formula.

II. Provisions of the agreement

future

scheduled passenger

the TPJVA,
current

the parties agree to coordinate their
Under
air
and
respective
transport
services within the EEA to and from London
Heathrow airport (and London Stansted airport to the extent
that London Heathrow services are displaced as a result of the
implementation of the TPJVA) and Manchester International
airport. Services that do not depart from or arrive at these
airports fall outside the scope of the TPJVA.

The coordination between the parties is organised through the
tripartite joint venture (TPJV). The cooperation between the
parties consists in:

(cid:151) the establishment of a joint route system (cid:151) with regard to
the services which fall within the scope of the TPJVA, the
parties will decide jointly on the capacity used on the
routes, and will specify for each of these services which
the
will be
operating party will code-share with one of
the two
remaining parties,

the operating party. On each service,

(cid:151) fare structure (cid:151) the parties will establish a fare structure
for the services which fall within the scope of the TPJVA,

(cid:151) schedule coordination (cid:151) flight schedules will be coor-

dinated to achieve optimum integration.

With regard to the services which fall within the scope of the
TPJVA, the parties also coordinate, through the TPJVA, their
efforts in the field of sales and marketing. They use all
reasonable efforts to harmonise service standards, product

the EEA,

the parties

For services not covered by the TPJVA, whether within or
outside
activities
pursuant to separate bilateral alliance agreements concluded
between BD and SAS, and BD and LH respectively on 9
November 1999 (hereafter
(cid:145)bilateral
agreements(cid:146)).

referred to as

coordinate

their

the

The Bilateral Agreements cover code sharing, the coordination
of schedules and the establishment of through check-in facilities
in order to achieve the efficient and seamless transfer of
passengers. However, they do not provide for any sharing of
profits and losses and provide for only a limited degree of fare
structure cooperation to the extent necessary for the smooth
operation of the code-share arrangements.

The parties retain their corporate identity. Each of the parties
remains responsible for the actual operation of
the TPJVA
services, according to their own business practices. Each of
the parties
requisite
aviation operation authorisations
and all other permits,
licences, certificates and insurance policies required by the
relevant authorities to be able to operate the services in
question.

for maintaining the

responsible

is

III. Reasons for exemptions

According to the parties, before entering into the agreement,
there was no overlap between the parties’ passenger air
transport services on any origin/destination pair apart from
London(cid:150)Frankfurt. On all other routes parties were neither
actual nor potential competitors. The parties have put forth
the application of
the following arguments in support of
Article 81(3):

1. Improvements in the provision of airline services and

promotion of economic progress

According to the parties, the arrangements give rise to the
following improvements in distribution and technical progress:

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R e o r g a n i s a t i o n a n d e x p a n s i o n o f
p a r t i e s ’ e x i s t i n g n e t w o r k s

t h e

E x c h a n g e o f k n o w - h o w a n d i n c r e a s e d
e f f i c i e n c y

For a number of reasons, such as structural difficulties at its
main UK airport London Heathrow, BD has been unable to
develop its network independently. The agreement allows the
parties, and in particular BD, to extend and reorganise their
services. Thus, for example, BD will be able to offer services
between London and Madrid or Rome. It will also enable SAS
and LH to sell online services between London and a number
of intra-UK regional destinations, as well as between London
and Dublin. The TPJVA allows the parties to optimise the use
of their slots and airport facilities portfolio at Heathrow in
order to reorganise the services currently offered and to be
able to commence services on additional routes.

The reorganisation within the TPJVA of the parties’ services at
London Heathrow also includes the move of a number of
services from London Heathrow to Stansted. The parties will
seek to ensure that the expansion of their networks is not to
the detriment of existing services which are commercially and
operationally viable. They envisage,
that certain
services that currently are operated from London Heathrow
to,
for example, Germany (such as Cologne) will move to
London Stansted.

therefore,

The TPJVA will also increase the importance of Manchester
allowing the parties to increase and improve their Manchester
services. This development will establish network competition
on services from the north-west of England for the first time.

I n c r e a s e d n e t w o r k c o m p e t i t i o n

According to the parties, in addition to the reorganisation and
extension of the Parties’ networks, the notified arrangement
will
increase the degree of network competition between
alliances in the European aviation market as it will enable:

(cid:151) LH and SAS to compete for domestic UK traffic as well as
for
traffic between the UK and Ireland. The notified
arrangement will allow both SAS and LH to transport
passengers profitably from any point in the network to
regional destinations in the UK,

(cid:151) the parties to commence services to important destinations
where currently there is no competition between alliances
such as London(cid:150)Barcelona and London(cid:150)Madrid; or increase
existing alliance competition on other large origin/desti-
nation pairs such as London(cid:150)Rome and London(cid:150)Milan,

(cid:151) each of the parties and, in particular SAS and LH, to market
their services to third countries not served by the other
parties.

lead to
The parties claim that the notified arrangement will
technical progress. An exchange of know-how is envisaged
between the parties in the fields of sales and marketing and,
on the basis of
in the bilateral
the relevant provisions
agreements,
IT (such as pricing, revenue management and
network planning systems).

2. Consumers will share the benefits from the cooperation

agreement

According to the parties, the notified arrangement leads to
important consumer benefits. It allows the parties to compete
more vigorously and to commence services on large origin/
destination pairs which hitherto were operated by only one
alliance (for example, London(cid:150)Barcelona or London(cid:150)Madrid).
The notified arrangement will also lead to important cost
savings and efficiencies which will enable the parties
to
continue offering competitive services. Travellers will have a
wider choice of air transport services to more destinations at
very competitive fares. They will also benefit from a better
connection between the services, more convenient scheduling
and seamless travel. Existing arrangements relating to lounge
access, through check-in etc. will be improved and will be
extended to services which hitherto were not covered in the
bilateral arrangements between the parties.

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

the arrangements are necessary to
The parties argue that
achieve the above-mentioned benefits. BD does not have the
financial or operational
its
resources
to develop further
network independently.
further handicapped by not
being permitted to operate from Heathrow on long-haul, prof-
itable transatlantic routes.

is

It

the provisions of

According to the parties,
the TPJVA are
necessary to allow the parties to re-organise their networks
and optimise their use of slots and airport facilities. The joint
sales and marketing of
the TPJVA air transport services is
necessary to maximise the effectiveness of the parties’ coop-
eration within the framework of the TPJVA.

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

As set out above, the parties have put forward that there was
an actual overlap between the parties’ services on only one
origin/destination pair, namely London(cid:150)Frankfurt. On none
of
the other origin/destination pairs on which the parties
cooperate under the arrangement, the parties claim that they
are actual or potential competitors. On these origin/destination
pairs,
in significant market
power of the parties.

the cooperation will not result

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IV. Proposed commitments

the joint venture agreement
Following their notification of
the Commission services have
notified on 1 March 2000,
these
been in discussions with the parties. As a result of
discussions, with a view to obtaining an Article 81(3) of the
EC Treaty exemption pursuant to Article 5(3) of Regulation
(EEC)
proposed
commitments in order to remedy any competition concerns
in particular with regard to point-to-point business class
passengers on the London(cid:150)Frankfurt pair.

submitted

3975/87,

parties

have

the

their
These commitments shall be binding on the parties,
subsidiaries, successors and assigns and the parties commit to
cause their subsidiaries, successors and assigns to comply with
these commitments.

1. Commitments pertaining to new entrants

is not currently operating air

the EC Treaty exemption becomes effective,

If an airline that
transport
services between Frankfurt and London ((cid:145)the new entrant(cid:146)),
which is independent of the parties, wishes to commence a
new service within six months of the date that the Article
the
81(3) of
parties undertake to make four pairs of slots available at
Frankfurt Main airport ((cid:145)FRA(cid:146)) for such a new service (here-
inafter (cid:145)new entrant slots(cid:146)). Subsidiaries, franchisees or alliance
partners of any airline currently operating services between
shall not be
FRA and London (hereinafter
considered a new entrant. The undertaking to make slots
available to a new entrant is subject to the general conditions
set out in Part 3 of these commitments.

(cid:145)FRA-LON(cid:146))

The new entrant slots are to be understood as the six slots BD
used for daily services between Frankfurt Main and London
Heathrow airports prior to entering into the joint venture
agreement with LH and SAS and which are currently being
used by LH or BD ((cid:145)BD slots(cid:146)) as well as two additional slots
to be chosen by the parties. The parties undertake to ensure
that the two additional slots will be within 45 minutes of the
time requested by the new entrant as long as the parties
possess slots within the relevant time period.

If a new entrant is not a participant in or does not have its
own comparable frequent flyer programme then upon request,
the parties undertake for the services offered on FRA-LON to
allow the new entrant to participate in one of their frequent
flyer programmes or in their joint programme, if such a joint
programme exists. A contract with a new Entrant will be
concluded on reasonable and non-discriminatory conditions
including as to compensation for any costs incurred by the
parties.

the parties also undertake to enter into an
Upon request,
interline agreement with the new entrant
for services on
FRA-LON in any case where the new entrant does not have

an existing interline agreement with the parties. Any new
agreement will provide for interlining on industry standard
terms.

2. Commitments pertaining to incumbents on FRA-LON and

return of slots to the pool at FRA

In the event that a new entrant requests some, but not all of
the four pairs of new entrant slots, the parties undertake to
make the remaining number of FRA slots available, to any
airline currently operating services on FRA-LON ((cid:145)Incumbents
on FRA-LON(cid:146) or (cid:145)Incumbent(s)(cid:146)) for the purposes of creating
(cid:145)additional
is
made to the parties within 12 months of the date that the
Article 81(3) of the EC Treaty exemption becomes effective.
The undertaking to make slots available to incumbents
pursuant to this paragraph is subject to the general conditions
set out in Part 3 of these commitments.

frequencies(cid:146) on FRA-LON, provided a request

the purposes of

In the event that no new entrant seeks slots from the parties
for a new service on FRA-LON, the parties undertake to make
three pairs of FRA slots available to incumbents on FRA-LON
frequencies(cid:146) on
for
FRA-LON, provided a request is made to the parties within
12 months of
the EC
Treaty exemption becomes effective. The undertaking to
make
to this
paragraph is subject to the general conditions set out in Part
3 of these commitments.

to incumbents pursuant

the Article 81(3) of

creating (cid:145)additional

the date that

available

slots

the time that

the notice pursuant

The term (cid:145)additional frequencies(cid:146) shall be understood to mean
that slots will only be made available to incumbents for the
purposes of adding one or more frequencies beyond the
number operated at
to
Article 5 of Regulation (EEC) No 3975/87 is published in the
Official Journal of the European Communities. If at any time an
incumbent eliminates any of
the frequencies operated on
FRA-LON at the time that the notice pursuant to Article 5
of Regulation (EEC) No 3975/87 is published in the Official
Journal, and if the service is not continued by a subsidiary of
the incumbent within no more than two months of the elim-
ination of the service by the incumbent, the incumbent will be
to these
required to return the slots obtained pursuant
commitments
then make
available the released slots for other
incumbents or new
entrants for a further period of 12 months from the date the
slots are returned to the parties on the same terms and under
the same conditions as applied to the original slots transferred.
If no other incumbent or new entrant requests the released
slots within the 12 month period, the parties undertake to
return the released slots to the FRA slot pool at the end of
the then current IATA season.

to the parties. The parties will

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The parties undertake that the slots provided to incumbents
pursuant to this part will be within 45 minutes of the time
requested by the incumbent as long as the parties possess slots
within the relevant time period.

The initial obligation to make slots available to other airlines
for services on FRA-LON terminates 12 months after the date
that the Article 81(3) of the EC Treaty exemption becomes
effective. In the event that no new entrant seeks slots from
the parties and incumbents do not
six slots
available to incumbents, British Midland undertakes to return
any of the six (cid:145)BD slots(cid:146) to the FRA slot pool at the end of the
then current IATA season. Any slots returned to the FRA pool
will be allocated by the slot coordinator in accordance with the
slot allocation procedure set out in Council Regulation (EEC)
95/93 or any other Regulation that may amend or supercede it.

request all

3. General conditions concerning slots

Slots will only be made available by the parties pursuant to the
terms set out above provided that the airline seeking slots can
demonstrate that all reasonable efforts to obtain slots at FRA
for the FRA-LON service through the normal workings of the
slot allocation procedure have failed. Requests have to be made
In order to address competition concerns with
in writing.
regard to point-to-point
customers, when
making slots available, preference will be given to companies
operating between FRA and London Heathrow/Gatwick/and
London City airports.

time-sensitive

available by the parties under

Any slots made
these
commitments will be offered without any compensation.
Slots obtained by any new entrant or incumbent carrier shall
be exclusively used to operate additional services on FRA-LON.
The new entrant must make a clear request for the slots needed
within three months and it must commence the service within
six months of the date that the Article 81(3) of the EC Treaty
exemption becomes effective. The incumbent must make the
request within 12 months of the date that the Article 81(3) of
the EC Treaty exemption becomes effective and it must
commence such services within no more than 18 months of
the EC Treaty exemption becoming
the Article 81(3) of
incumbent which has
effective.
to
obtained slots pursuant
operate the new or additional service on FRA-LON,
it shall
be required to immediately return the obtained slots to the
parties. The parties will
in such a case make available the
released slots for other new entrants or other incumbents for
a further period of 12 months from the date the slots are
returned to the parties on the same terms and under the
same conditions as applied to the original slots transferred. If
no other new entrant or other incumbent requests the released
slots within the 12 month period, the parties undertake to

to these commitments ceases

If any new entrant or

return the released slots to the FRA slot pool at the end of the
then current IATA season. For the purposes of this paragraph,
a carrier and its subsidiaries will be deemed to have ceased
operating the additional service on FRA-LON where it or they,
as the case may be, do not make at least 80 % use of the slots
in question for a service on FRA-LON, unless it is justified on
one of the grounds referred to in Article 10(5) of Regulation
(EEC) No 95/93 or any other Regulation that may amend or
supercede it.

slots pursuant

the provision of

incumbent breaches

the agreement
If a new entrant or
concluded for
to these
commitments, all slots covered by the agreement shall be
returned immediately to the parties. The parties will in such
a case make available the released slots for other new entrants
or other incumbents for a further period of 12-months from
the date the slots are returned to the parties on the same terms
and under the same conditions as applied to the original slots
incumbent requests the
transferred.
If no new entrant or
released slots within the 12 month period,
the parties
undertake to return the released slots to the FRA slot pool at
the end of the then current IATA season. Subsidiaries or fran-
chisees of
that originally
received the slots released from the parties shall not be
eligible to receive any slots released pursuant to this paragraph.

the new entrant or

incumbent

In the event the Commission revokes the Article 81(3) of the
EC Treaty exemption of the joint venture agreement pursuant
to Article 6 of Regulation (EEC) No 3975/87 or an equivalent
provision in any successor regulation, the Article 81(3) of the
EC Treaty exemption is annulled, or the parties terminate the
notified joint venture agreement, the slots provided under these
commitments to an airline operating services on FRA-LON
shall be returned to the parties if the parties so request.

To ensure that the slots provided by the parties are used consis-
tently with these commitments, a mechanism will be agreed
between the parties and the carrier receiving slots that will
allow the parties to monitor how the slots are being used.

4. Duration of exemption and commitments

These commitments are offered on the understanding that the
exemption granted pursuant to Article 5(3) of Regulation (EEC)
No 3975/87 will be for a period of six years from the date of
publication in the Official Journal of the notice concerning the
joint venture agreement. These commitments will only take
effect from the date that the Article 81(3) of the EC Treaty
exemption becomes effective pursuant to Article 5(3) of Regu-
lation (EEC) No 3975/87. The obligations of
the parties
pursuant to these commitments will expire on the date that
the Article 81(3) exemption terminates.

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the Commission revokes

the Article 81(3)
In the event
exemption of the joint venture agreement pursuant to Article
6 of Regulation (EEC) No 3975/87 or an equivalent provision
in any successor regulation, the Article 81(3) exemption is
annulled, or the parties terminate the notified joint venture
agreement, these commitments will be null and void as from
the date of revocation, the date of the annulment judgment, or
the date of termination, as the case may be. As provided for in
Part 3, the parties will also have the right to demand return of
any slots provided under these commitments to an airline
which is at the time of the revocation, annulment judgment,
or termination, operating services on FRA-LON using those
slots.

V. Conclusion

The Commission having established prima facie
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). According to Article 5(3) of Regulation (EEC) No

that

3975/87, if the Commission does not notify the parties within
90 days of the date of this publication, the arrangements, as
described above, would be exempt from the prohibition under
Article 81(1) for a maximum of six years.

In accordance with Article 5 of
the
Commission invites interested parties to send their comments
concerning
between British
cooperation agreement
Midland, Lufthansa and SAS and the proposed commitments,
within 30 days of the date of publication of this notice, to:

the same Regulation,

the

European Commission
Directorate-General for Competition
for the attention of Oliver Stehmann
Unit COMP/D2
Office J-70 2/82
Rue de la Loi/Wetstraat 200
B-1049 Brussels
Fax (32-2) 296 29 11
e-mail: Oliver.Stehmann@cec.eu.int

Ex-post publicity of Eurostat actions which received a grant in 2000

(2001/C 83/04)

In accordance with point 1.2.2,
hereby informed of actions that benefited from a Eurostat grant during the year 2000.

last indent, of the Commission Vade-mecum on grants, the public is

These actions are available on a list on the EUROPA server http://europa.eu.int. The list concerned is
obtainable via (cid:145)Welcome(cid:146), (cid:145)Institutions(cid:146), (cid:145)Commission(cid:146), (cid:145)Directorates-General and services(cid:146), (cid:145)Eurostat(cid:146), (cid:145)Other
information(cid:146), (cid:145)Calls for tenders and grants(cid:146) and then enter the file (cid:145)Ex-post publicity 2000 grants(cid:146).

The list contains the file number, the unit concerned, the names and country of the beneficiaries, the
amount granted and the co-financing rate of the action.

An ex-ante publicity action has been made for all these actions except for the few spontaneous grants
which are listed separately and for which a specific justification has been given.