Notice published pursuant to Article 27(4) of Council Regulation (EC) No 1/2003 in Case COMP/39.596 — British Airways/American Airlines/Iberia (Text with EEA relevance)
Date: 2010-03-10
Institutions: European Commission
Subjects: air transport, airline, carriage of passengers, economic concentration, joint venture, merger control, restriction on competition








C_2010058EN.01002001.xml










10.3.2010   


EN


Official Journal of the European Union


C 58/20





Notice published pursuant to Article 27(4) of Council Regulation (EC) No 1/2003 in Case COMP/39.596 — British Airways/American Airlines/Iberia
(Text with EEA relevance)
2010/C 58/07
1.   INTRODUCTION







(1)


According to Article 9 of 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 (1), in cases where it intends to adopt a decision requiring that an infringement is brought to an end and the parties concerned offer commitments to meet the concerns expressed to them by the Commission in its preliminary assessment, the Commission may decide 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. According to Article 27(4) of the same Regulation, where the Commission intends to adopt a decision pursuant to Article 9, it 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.




2.   SUMMARY OF THE CASE







(2)


British Airways (BA), American Airlines (AA) and Iberia (IB) are members of oneworld, a worldwide airline alliance. On 14 August 2008, they announced that they intended to set up a revenue-sharing joint venture covering all their passenger air transport services on routes between Europe and North America. The joint venture agreements between BA, AA and IB provide for cooperation on key parameters of competition such as scheduling, capacity, price and marketing.










(3)


On 29 September 2009, the Commission adopted a statement of objections outlining the Commission's provisional view that the planned joint venture would infringe Article 101 of the Treaty on the Functioning of the European Union (TFEU) on certain EU-US city pairs. That statement of objections constitutes a preliminary assessment within the meaning of Article 9(1) of Regulation (EC) No 1/2003.










(4)


The preliminary assessment expressed the concern that the joint venture between BA, AA and IB would restrict competition by object on certain routes, namely on London–Dallas, London–Boston, London–Miami, London–Chicago, London–New York, Madrid–Miami and Madrid–Chicago.










(5)


Moreover, in view of the current closeness of competition between the parties and their important combined market position on these city pairs, the joint venture would be likely to produce appreciable anti-competitive effects. Specifically, the preliminary assessment took the view that on these city pairs the competitive constraint which is currently exercised by the parties on each other — and which would be lost as a result of the joint venture — would not be replaced by existing non-stop or one-stop competitors or by likely, timely and sufficient new entry or expansion (whether non-stop or one-stop), in view of the significant barriers to entry in these markets.










(6)


These entry barriers include, in particular, slot constraints at London airports and New York JFK airport, the parties’ frequency advantage and hub dominance, access to connecting traffic and network effects resulting from Frequent Flyer Programmes and other incentive schemes. Regulatory barriers also persist. While the EU-US first stage agreement has removed all regulatory barriers to access on transatlantic routes, EU carriers are still barred from operating domestic routes within the US (cabotage), need to conclude code-sharing agreements with US carriers in order to offer connecting flights in the US and are prevented from developing hubs on the US side of transatlantic routes. Commercial opportunities are further limited by restrictions on ownership and control as US airline ownership and control rules limit foreign investment to 25 % of voting equity. Currently, so-called second-stage negotiations are underway between the EU and the US with a view, in particular, to increasing investment opportunities.










(7)


Furthermore, the Commission's preliminary assessment took the view that the planned cooperation could restrict competition not only between the parties themselves, but also between the parties and their competitors. A key issue of competition on long-haul operations is the availability of connecting traffic. Some of the parties’ competitors on some of the above mentioned routes are particularly reliant on interline traffic from the parties. The preliminary assessment expressed the concern that the planned cooperation could restrict those competitors’ access to the parties’ interline inventory.










(8)


On London–New York and London–Chicago, competition concerns were limited to the premium market (encompassing services in all cabin and fare classes except services in restricted economy), whereas on London–Dallas, London–Boston, London–Miami, Madrid–Miami and Madrid–Chicago routes the Commission concerns related to both premium and non-premium markets.




3.   THE MAIN CONTENT OF THE OFFERED COMMITMENTS







(9)


The parties did not agree with the Commission’s statement of objections. They have nevertheless offered commitments pursuant to Article 9 of Regulation (EC) No 1/2003 in order to meet the Commission’s competition concerns and allow it to conclude that there are no longer grounds for action.










(10)


The commitments are briefly summarised below and published in full in English on the website of the Directorate-General for Competition at: http://ec.europa.eu/competition/antitrust/cases/index/by_nr_79.html#i39_596










(11)


The parties offer commitments on six city pairs, namely London–Dallas, London–Boston, London–Miami, London–Chicago, London–New York and Madrid–Miami.










(12)


The parties offer:






(a)


to make slots available at London Heathrow or London Gatwick — at the competitor's choice — to allow competitors to operate up to seven additional non-stop frequencies per week on London–Dallas, 14 on London-Boston, seven on London–Miami and 14 on London–New York. On the London–New York City pair, the parties also offer to provide the competitor with operating authorisations at New York JFK airport at times matching the slots to be released at the relevant London airport. This offer is subject to a number of conditions, including that the competitor has exhausted all reasonable efforts to obtain the necessary slots through the general slot allocation process.
As of IATA summer season 2013, the parties will make unused slots on the London–Dallas and London–Miami city pairs, if any, available also to one-stop entrants, although non-stop entrants will keep having priority over one-stop entrants;










(b)


to enter into fare combinability agreements with competitors on the city pairs listed in paragraph 11. In the case of London–Chicago, London–New York and Madrid–Miami, the parties may limit these agreements to cover only passengers on the premium market (as defined in paragraph 8). Eligible competitors are all competitors which operate a non-stop service on the respective route and do not operate a hub at both ends of the route;










(c)


to enter into special prorate agreements for behind and beyond traffic on the city pairs listed in paragraph 11. Eligible competitors are (1) airlines launching or expanding services, irrespective of whether they use slots made available by the parties, and (2) on London–Chicago, London–New York and Madrid-Miami, also existing competitors which operate a non-stop service on the respective route. These competitors are eligible for special prorate agreements when they do not operate a hub at both ends of the route;










(d)


to open their Frequent Flyer Programmes on the city pairs listed in paragraph 11 to a competitor launching or expanding a service on the route, if such competitor does not have a comparable programme and does not participate in any of the parties’ programmes.














(13)


The parties offer to give responsibility to a trustee to monitor the application of the commitments. In case of a disagreement between a new entrant and the parties on the commitments, the parties offer a dispute resolution process where an arbitral tribunal will ultimately decide on the matter.










(14)


Taking into account the parallel investigation of the case by the US Department of Transportation (DOT) and the cooperation between the Commission and the DOT pursuant to Annex II of the EU-US Air Transport Agreement dated 30 April 2007, the commitments also provide for close involvement of the DOT throughout the procedure. The Commission shall consult and take due consideration of the opinion of the DOT at key steps of the procedure. The DOT may also reserve the right to approve a trustee following its separate review of the proposed cooperation.




4.   INVITATION TO COMMENT







(15)


Subject to the comments in response to this notice, the Commission intends to adopt a decision under Article 9(1) of Regulation (EC) No 1/2003 declaring the commitments summarised above to be binding for a period of 10 years from the date of notification of the Commission decision to the parties. If there are substantial changes to the commitments as a result of the comments in response to this notice, a new notice pursuant to Article 27(4) of Regulation (EC) No 1/2003 will be published.










(16)


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 one month following the date of this publication. Interested third parties are also asked to submit a non-confidential version of their comments, in which business secrets and other confidential information are deleted and are replaced by a non-confidential summary or by the words ‘business secrets’ or ‘confidential’. Reasonable requests will be respected.










(17)


Comments can be sent to the Commission under reference number ‘Case COMP/39.596 — British Airways/American Airlines/Iberia’ either by e-mail (COMP-GREFFE-ANTITRUST@ec.europa.eu), by fax (+32 22950128) or by post, to the following address:





European Commission




Directorate-General for Competition




Antitrust Registry




1049 Bruxelles/Brussel




BELGIQUE/BELGIË










(1)  OJ L 1, 4.1.2003, p. 1. With effect from 1 December 2009, Articles 81 and 82 of the EC Treaty have become Articles 101 and, respectively, 102 of the TFEU. The two sets of provisions are in substance identical. For the purposes of this notice references to Articles 101 and 102 of the TFEU should be understood as references to Articles 81 and 82 of the EC Treaty when applicable.