Notice published pursuant to Article 27(4) of Regulation (EC) No 1/2003 in Case COMP/37.749 — Austrian Airlines/SAS cooperation agreement   (Text with EEA relevance)
Date: 2005-09-22
Institutions: European Commission
Subjects: air transport, dominant position, inter-company agreement, transport company

C 233/18

EN

Official Journal of the European Union

22.9.2005

Notice published pursuant to Article 27(4) of Regulation (EC) No 1/2003 in Case COMP/37.749 —
Austrian Airlines/SAS cooperation agreement

(2005/C 233/08)

(Text with EEA relevance)

1. Introduction

According to Article 9 of Council Regulation (EC) No
1/2003 (1), the Commission may decide — in cases where it
intends to adopt a decision requiring that an infringement is
brought
to an end and the undertakings concerned offer
commitments to meet the concerns expressed to them by the
Commission in its preliminary assessment — to make those
commitments binding on the undertakings. Such a decision
may be adopted for a specified period and shall conclude that
there are no longer grounds for action by the Commission.
the
According to Article 27(4) of
Commission shall publish a concise summary of the case and
the main content of the commitments. Interested parties may
submit their observations within the time limit fixed by the
Commission.

the same Regulation,

As a result of the letter of serious doubts the parties decided to
address the Commission's concerns as to bilateral traffic by
amending the cooperation agreement and replacing it by the
‘limited cooperation agreement’ as well as a marketing and
sales agreement on 31 December 2001. The new agreement
contained a carve-out of the entire cooperation on bilateral
traffic between Austria and the Nordic countries. It thereby
addressed the main competition concerns raised in the letter of
serious doubts. In practice however this solution could not be
implemented.

further discussions with the Commission's
As a result of
services, the parties abandoned the carve-out and concluded
the ‘amended cooperation agreement’ on 24 October 2002.
The scope of the new agreement re-envisages a cooperation on
bilateral traffic between Austria and the Nordic countries. In
contrast to the cooperation agreement originally notified, the
‘amended cooperation agreement’ does not
lead to a joint
venture for bilateral traffic. The main elements of the agree-
ment are:

2. Summary of the case

(a) Generally applicable service standards

On 30 December 1999 Scandinavian Airlines System (SAS)
and Austrian Airlines (AuA) notified a cooperation agreement
to the Commission with a view to obtaining an individual
exemption pursuant to Article 5(1) of Regulation (EEC) No
3975/87, Article 81(3) and Article 53(3) Agreement on the
EEA. Under the agreement the parties cooperated on all routes
world-wide through joint planning of schedules, coordination
of pricing policies, route programs and capacity. The most far
reaching cooperation concerned the traffic between Austria and
the Nordic Countries (Norway, Sweden and Denmark) where a
Joint Traffic System (JTS) applied to all air transport services
exclusively and for which the parties shared costs and revenue.
Pursuant to Article 5(3) of Regulation (EEC) No 3975/87, on
11 July 2000 the Commission published a notice inviting third
parties to comment on the agreement.

On 4 October 2000 the Commission issued a letter raising
serious doubts as to the impact of the agreement on competi-
tion. In particular the Joint Traffic System was likely to elimi-
nate competition on a substantial part of the Austria-Nordic
countries air transport market and could therefore render
Article 81(3) EC-Treaty inapplicable notably in the Vienna-
Copenhagen and in the Vienna-Stockholm routes.

Services are provided on equal terms to passengers on code
shared flights.

(b) Code sharing and network cooperation

The code share agreement covers all world wide flights
under this agreement as the parties jointly select. The
parties strive to coordinate better connections and capacity
their respective airline network in order to develop
of
better
connections between and beyond their home
markets and to minimise passenger connecting times for
services through their combined network. Transfer traffic
principles and rules beyond the parties' hubs may be estab-
lished.

(c) coordination of fares and special pro-rates

(1) Council Regulation (EC) No 1/2003 of 16 December 2002 on the
implementation of the rules on competition laid down in Articles
81 and 82 of the Treaty (Official Journal L 1 of 4.1.2003, pages 1-
25).

The parties develop a harmonised pricing policy, coordinate
route programs and capacities. Fares for air transportation
shall be calculated and apportioned between the parties as
set forth in an implementing agreement.

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Official Journal of the European Union

C 233/19

(d) Marketing and sales

following is a description of the main content of these commit-
ments.

The coordination of sales will be taken over by the respec-
tive home carrier, based on the harmonised Sales &
Marketing policy. The parties agree on mutual integration
in the sales programs in the home market of the respective
party. Also, the parties strive to offer call centre's services
to the other party.

(e) Frequent flyer programs(FFP)

The parties have entered into an FFP agreement which
allows the FFP members of one of the parties to accrue and
redeem points when travelling with the other party.

According to the parties, the amended cooperation agreement
would allow them to achieve important improvements in the
production and distribution of their services, leading to sizeable
cost reductions. The parties also claim that due to the efficiency
gains, airfares between Copenhagen and Vienna have decreased
during the period 2002 to 2004. The consumer would also
benefit from coordinated flight schedules, increased number of
direct and transfer connections, through checking and other
alliance related advantages.

In spite of the fact that the original joint venture was replaced
by a very close cooperation agreement, the amended coopera-
tion agreement still raises the same competition concerns with
regard to the Vienna — Copenhagen and Vienna — Stockholm
city pairs. Given that a considerable part of travellers is depen-
dent on the use of direct flights and that there are no substi-
tutes to direct flights between Austria and the Nordic countries,
the cooperation between AuA and SAS may continue to restrict
competition in particular to the detriment of time sensitive
passengers. Vienna-Copenhagen is the only city pair on which
both parties operated prior to the cooperation, thus the coop-
eration has eliminated actual competition between the parties.
it has to be noted that a new entrant currently
However,
provides services on this route on the basis of the parties'
commitments described below. On the remaining routes, the
cooperation eliminates only potential competition. Also the
preliminary market test did not indicate that any other carrier
would be interested in operating on these city pairs.

3. The main content of the offered commitments

The parties subject to the proceedings have offered commit-
ments to meet the Commission's competition concerns. The

— Commitments pertaining to slots:

The Parties will make available to a New Entrant
number of take-off and landing slots:

the

— for flights between Vienna and Copenhagen: up to two

(2) frequencies per day;

— for flights between Vienna and Stockholm: up to two

(2) frequencies per day.

— Commitments pertaining to interlining:

The parties agree to enter into an IATA MITA (Multilateral
Interline Traffic Agreement) agreement with a new entrant
in case it does not have an existing interline agreement. The
interline agreement will be based on the established IATA
principles.

— Special pro-rate agreement:

On request, the Parties shall enter into a special prorate
agreement with the New Entrant provided part of
the
journey involves one of the Affected Routes. The conditions
shall be comparable to those entered into with third non-
alliance/other alliance carriers in connection with such a
route.

— Commitments pertaining to frequent flyer program:

Upon request the parties will allow the new entrant to
participate in one of their frequent flyer programs.

— Frequency freeze:

The parties are willing to freeze their daily frequencies for a
limited time period.

— Commitment to facilitate intermodal passenger transport services

At
the request of a railway or other surface transport
company operating between Austria and Denmark/Sweden/
Norway the Parties shall enter into an intermodal agree-
ment whereby they provide passenger air transport on their
services on any of the Identified European City Pairs as part
of an itinerary that includes surface transportation by the
Intermodal Partner.

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Official Journal of the European Union

22.9.2005

4. Invitation to make comments

The Commission intends, subject to market testing, to adopt a
decision under Article 9(1) of Regulation (EC) No 1/2003
declaring the commitments summarised above and published
on the Internet on the web-site of the Directorate-General for
Competition to be binding. In accordance with Article 27(4) of
Regulation (EC) No 1/2003, the Commission invites interested
third parties to submit their observations on the proposed
commitments. These observations must reach the Commission
not later than 1 month following the date of this publication.

Observations can be sent to the Commission by e-mail to
(Maria-Jose.Bicho@cec.eu.int) or to (Fabrizia.Benini@cec.eu.int),
by fax (No (32-2) 296 29 11) or by post, under reference

number COMP/37.749 — Austrian Airlines/SAS cooperation
agreement, to the following address:

European Commission
Directorate-General for Competition
Antitrust Registry
J-70
B-1049 Brussels

In the subsequent course of the proceedings it may become
necessary or appropriate to make available a summary of the
comments following the publication of the market test docu-
ment to the parties offering the commitments. In this respect
we kindly ask you to identify any confidential information or
business secrets. Legitimate requests will be respected.