Notice pursuant to Article 5 of Regulation (EEC) No 3975/87 of 14 December 1987 concerning case COMP/38.284/D2 (Air France/Alitalia) (Text with EEA relevance)
Date: 2002-05-08
Institutions: European Commission
Subjects: European Commission, France, Italy, air transport, competition law, cooperation policy, dominant position, exchange of information, transport company

8.5.2002

EN

Official Journal of the European Communities

C 111/7

(c) Specific time limit for submission of claims for market economy

8. Non-cooperation

status

Duly substantiated claims for market economy status, as
mentioned in paragraph 5(1)(d) of this notice, must reach
the Commission within 21 days of the date of publication
of
the European
Communities.

this notice in the Official

Journal of

7. Written submissions, questionnaire replies and corre-

spondence

All submissions and requests made by interested parties must
be made in writing (not in electronic format, unless otherwise
specified), and must indicate the name, address, e-mail address,
telephone and fax, and/or telex numbers of the interested party.

Commission address for correspondence:

European Commission
Office: TERV — 0/13
B-1049 Brussels
Fax (32-2) 295 65 05
Telex COMEU B 21877.

In cases in which any interested party refuses access to or does
not provide the necessary information within the time limits,
or significantly impedes the investigation, provisional or final
findings, affirmative or negative, may be made in accordance
with Article 18 of the Basic Regulation, on the basis of the
facts available.

Where it is found that any interested party has supplied false or
misleading information, the information shall be disregarded
and use may be made of the facts available.

9. Schedule of the investigation

this notice in the Official

The investigation will be concluded, according to Article 6(9) of
the Basic Regulation within 15 months of the date of the publi-
cation of
the European
Communities. According to Article 7(1) of the Basic Regulation,
provisional measures may be imposed no later than 9 months
from the publication of this notice in the Official Journal of the
European Communities.

Journal of

Notice pursuant to Article 5 of Regulation (EEC) No 3975/87 of 14 December 1987 (1) concerning
case COMP/38.284/D2 (Air France/Alitalia)

(2002/C 111/06)

(Text with EEA relevance)

1. The application lodged by Société Air France (Air
France) and Alitalia Linee Aeree Italiane SpA (Alitalia)

By letter of 12 November 2001, Air France and Alitalia
notified to the Commission a number of
cooperation
agreements and applied for negative clearance under Article
3(2) of Regulation (EEC) No 3975/87 or exemption under
Article 5 of the same Regulation.

2. Main content of the agreements

The cooperation agreement and its implementing agreements
are a key step for Alitalia to join the Skyteam Alliance.

Through their cooperation, which is being implemented
seek to establish a far-reaching,
progressively,
long-term strategic bilateral alliance, the main objectives of
which are as follows:

the parties

— Creation of a European multi-hub system based on the parties'
hubs at Paris Charles de Gaulle, Rome Fiumicino and Milan
Malpensa airports, in order to interconnect their worldwide
networks,

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

— Coordination of

passenger

the parties'

operations,
including extensive use of code-sharing, coordination of
revenue
their
scheduled
management, mutual
respective
Frequent Flyer Programmes, marketing coordination and
share of lounge usage,

network,
of

recognition

sales,
the

passenger

service

— Cooperation in other areas,

cargo operations,
catering,
passenger handling, maintenance, purchasing,
information technology, fleet development and purchase,
crew training and revenue accounting.

such as

to interconnect

As the aim of the alliance between Air France and Alitalia is to
create a multi-hub system in order
their
worldwide networks, the cooperation will be closer on the
France/Italy ‘Bundle’ which includes all
the routes between
France and Italy operated by Air France and/or Alitalia,
excluding beyond and behind flights, whether domestic or
international. Section 2.1 describes the ‘basic’ cooperation
that the parties will implement as regards the air transport of
passengers. The ‘enhanced’ cooperation within the bundle is
described in section 2.2.

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8.5.2002

2.1. General cooperation regarding the transport of passengers

2.4. Cooperation as regards ground-handling

Code-sharing, network coordination and route cooperation

Air France and Alitalia will make extensive use of code-sharing
on scheduled services worldwide.

The parties will develop all possible synergies as regards their
ground-handling operations. They will strive to handle each
other when economically acceptable,
their
respective structures, to co-locate their station premises and
coordinate their actions in order to achieve scale benefits.

to rationalise

The parties will use reasonable efforts to coordinate their flight
schedules in order to minimise the waiting times of connecting
passengers.

Cooperation on pricing and sales

Price coordination will be implemented where possible and the
parties will identify the key markets for which common pricing
will be developed.

The sales forces of the parties will remain separate in their
respective markets, but
their policies will be coordinated.
They will develop together new tools for sales and customer
service such as internet sites, electronic ticketing and airport
kiosks.

recognition of

the respective Frequent Flyer Programmes

Mutual
(FFPs)

The parties have signed two mutual recognition agreements for
their respective FFPs. These two mirror agreements allow the
members of the FFP of one of the parties to earn and redeem
points when flying with the other party.

3. Arguments invoked by the parties in support of their

application

3.1. Improvements in the provision of airline services and

promotion of economic progress

The parties argue that
mentary:

their networks are highly comple-

complementarity of

— Air France's base of operations is Paris Charles de Gaulle.
Alitalia is headquartered in Rome, where its operations are
based on the Fiumicino hub, and also has a significant
operation in Milan based on the Malpensa hub. The
geographic
these hubs and their
catchment areas would enable the parties to allocate their
resources better to ensure ‘natural flows over natural hubs’,
both within and beyond Europe. For example, passengers
travelling from Scandinavia to Greece will be able to choose
the most convenient flight routed through any of the three
hubs,

2.2. Cooperation on the France/Italy bundle as regards the

transport of passengers

On the France/Italy Bundle, in addition to the parties' overall
cooperation described above,
also agree on
frequencies and share their capacities and their earnings.

the parties

— In addition, Air France's network presence is stronger on
routes between Europe and North America, the Far East,
and Sub-Saharan Africa. In addition to its large number of
destinations in Southern Europe, Alitalia's network is more
focused on routes between Europe and North Africa, the
Middle East, and Latin America.

Sharing of capacities and agreement on the frequencies

The parties will share passenger capacity on the bundle. A
Business Plan lays down the details of the capacity adjustments
between the parties over the next four years, both as regards
the frequencies of
the aircraft
operated by each carrier on each flight.

the flights and the size of

Sharing of earnings

Air France and Alitalia intend to share the earnings derived
from the bundle. A convergence plan has been agreed so
that, after three years, a 50/50 share will be in place.

2.3. Cooperation on cargo operations

The parties will also cooperate in the field of cargo transport
worldwide. A short-term work plan has been agreed in order to
address their schedule and capacity coordination and the devel-
opment of hub links aimed at improving the parties' cargo load
factors,
feasibility and
convenience of a common point of contacts for customers.

joint pricing and sales

and the

The parties also argue that a multi-hub system presents benefits
in comparison with a single-hub system. A single hub limits
the benefits that may be achieved in terms of optimising traffic
density and/or the range of destinations: considering the finite
availability of
infrastructure access and industrial capability,
every hub carrier has to make a choice between adding new
destinations or adding new frequencies to existing destinations.
In contrast, the alliance between Air France and Alitalia, which
combines networks based on different hubs, should bring
‘economies of density’. These are generated when higher
larger aircraft and load
traffic density justifies the use of
airlines'
the
reducing
thereby
are
factors
per-passenger costs.

increased,

One of the alliance's goals is to achieve cost reductions to
remain competitive.
In particular, the parties anticipate that
the alliance will generate considerable synergies and cost
savings in the area of stations activities (including ground
services, passenger services, and lounges) and sales.

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On existing routes, the parties expect to increase frequencies
and/or aircraft size. In the medium term, the parties expect to
add new routes. The number of connecting opportunities and
of origin/destination pairs available with a seamless on-line
connection will also be increased. With the efficient use of
high-frequency connecting flights between hubs and working
with their regional partners, the parties expect to build critical
mass on their hubs.

According to the parties, even on short-haul routes such as
those between France and Italy, the primary effect of the trans-
action will be increased efficiency through shared best practices
and elimination of duplication.

3.2. Consumers will share the benefits from the cooperation

agreement

According to the parties, the alliance will benefit passenger
transport and cargo customers in at least four areas:

— wider choice of destinations and connections: Air France will
add 110 new destinations to Alitalia's network, not only
in France, but also in the United Kingdom, the Caribbean,
the Far East and Africa. Alitalia will add 21 new desti-
nations to the Air France network. In addition to many
Italian cities,
this list also includes new destinations in
Africa, the Middle East, and south-eastern Europe,

— lower

fares:

since

the alliance will bring about

cost
reductions resulting from the parties'
improved operating
efficiency, passengers will benefit from lower prices for the
alliance's services,

— benefits derived from frequent-flyer programmes: the alliance will
allow the Alitalia and Air France frequent-flyer programme
members to benefit from the frequent flyer programmes of
both companies,
increasing their opportunity to enjoy
promotions and free tickets,

scheduling

convenient

— more convenient, seamless service: the alliance will enable the
parties to optimise flight schedules, particularly on the
France/Italy bundle, providing a better distribution of
frequencies and timings. This will result in more choice
customers.
and more
Customers will gain access to a greater choice of routes
to reach a given destination (i.e. connecting through
different hubs)
among
as
scheduled flights and more on-line connections. Also,
simplified
baggage-handling
procedures will speed up the travel process and improve
the customer's experience. Rationalisation of services will
remove the need for passengers to move between terminals
at connecting airports. Lounge access will be improved.

a greater

check-in,

booking,

as well

choice

and

for

3.3. The cooperation agreement does not
parties restrictions which are not
attainment of the objectives of the agreement

impose on the
indispensable to the

First, the parties argue that the alliance is necessary for them-
increasingly intense
selves. Air France and Alitalia face
competition from a larger number of European and other
airlines in the context of the ongoing worldwide liberalisation
of air transport. Neither Air France or Alitalia would be able,
alone, to develop sufficiently by itself in order to compete
effectively with other major carriers, many of whom are
already part of strong alliances.

Second, the parties believe that cooperating is the only means
of achieving the benefits of the alliance. The growing demand
for wider networks and faster connections can only be met
through the implementation of multi-hub systems, and this is
not feasible without a high degree of cooperation between
airlines. Only through coordinating their fleets and networks
will the parties be able to increase connecting opportunities
and operate profitable
routes
connecting the under-served communities. While the parties
might be able to reduce costs without concluding a coop-
to the
eration agreement,
pooling of substantial material, human, and financial resources,
to bring about much greater savings.

services on the marginal

the alliance

thanks

likely,

is

Third,
the in-depth cooperation on the strategically crucial
France/Italy bundle is critical to the success of the alliance.
The parties believe that customer benefits will be maximised
through joint scheduling on the bundle and by optimisation of
capacity, frequencies, and timings, irrespective of the operating
In order to maximise connecting traffic, the parties
carrier.
need to increase capacity, offer enough frequencies and
schedule flights at appropriate timings, in order to maximise
connections at their respective hubs. Efficient joint scheduling
and reduction of costs can only be achieved through a joint
venture that involves a sharing of profits.

According to the parties, the aim of the transaction is not to
improve their position with respect to passengers travelling
between France and Italy. Rather, the agreement is designed
to improve the parties' network coverage and efficiency,
allowing both carriers to serve a wider range of destinations
more effectively. The importance of France-Italy routes to the
alliance lies not in point-to-point traffic but in the feeder traffic
provided over each carrier's hubs to serve a range of desti-
nations, primarily long haul. According to the parties,
the
route overlaps between France and Italy are incidental and
inevitable by-products of this type of agreement, and their
competitive significance is minimal when viewed in the
context of the transaction as a whole.

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8.5.2002

actual competitors and potential entrants will ensure continued
competition on the France/Italy bundle.

4. Conclusion

that

facie

established prima

The Commission has
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 Council Regu-
lation (EEC) No 3975/87, the Commission invites interested
parties to send their comments concerning the cooperation
agreement between Air France and Alitalia, within 30 days
of the date of publication of this notice, to:

European Commission
Directorate-General for Competition
Unit COMP/D/2
Office J-70, 2/234
B-1049 Brussels
fax: (32-2) 296 98 12
e-mail: Eduardo.Martinez-Rivero@cec.eu.int or
Michel.Lamalle@cec.eu.int

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

that

The parties consider
the alliance agreements do not
eliminate competition, either on the France/Italy bundle or
on their combined worldwide network. On the contrary, the
alliance will
increase competition in Europe by enabling the
parties to compete effectively with the more powerful alliances.

As regards in particular the France/Italy bundle, the parties put
forward that of the nearly 70 France-Italy routes operated by at
least one airline (more than half of which are operated by at
least one scheduled carrier), there are only six where the parties
both operate flights (1). The alliance can result in no elimi-
nation of competition on the vast majority of France/Italy
bundle routes. On the vast majority of France-Italy routes,
the parties either do not compete against each other or face
competition from other airlines. In addition, the parties believe
that there is strong potential for new entry on the overlap
routes as well as on other France/Italy bundle routes. These

(1) These are the routes Paris–Rome, Paris–Milan, Paris–Venice, Paris–

Bologna, Paris-Naples and Milan–Lyon.