CELEX: 31992M0259
Language: en
Date: 1992-11-27 00:00:00
Title: COMMISSION DECISION of 27.11.1992 declaring a concentration to be compatible with the common market (Case No IV/M.259 - BRITISH AIRWAYS / TAT) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Avis juridique important

|

31992M0259

COMMISSION DECISION of 27.11.1992 declaring a concentration to be compatible with the common market (Case No IV/M.259 - BRITISH AIRWAYS / TAT) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 326 , 11/12/1992 P. 0000

 COMMISSION DECISION of aaa declaring a concentration to be  compatible with the common market (Case No IV/M.259 - BRITISH  AIRWAYS / TAT) according to Council Regulation (EEC) No 4064/89   (Only the English text is authentic)  The paper version of the decision is available through the  sales offices of the Office of Official Publications of the  European Communities. PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1)(b) DECISION Registered with advice of delivery 1. Notifying party 2. Notifying party Dear Sirs, Subject: <ind> Case N  IV/M259 - BRITISH AIRWAYS/TAT  <tab>  <tab>  <ind> Notification of 23.10.1992 pursuant to  Article 4 of Council Regulation N  4064/89.  1. <ind> The above mentioned operation concerns the acquisition  by British Airways Plc of a 49,9% interest in TAT European  Airlines, currently wholly owned by TAT S.A.  2. <ind> After examination of the notification, the Commission  has concluded that the notified concentration falls within the  scope of Council Regulation N  4064/89 and does not raise  serious doubts as to its compatibility with the common market.  I. THE PARTIES  3. <ind> British Airways Plc (BA) is a major British airline  principally engaged in the carriage of passengers and freight.  It also has interests in other activities connected with the  air transport business such as engineering and maintenance  services, training services, ground handling services, etc.  4. <ind> TAT S.A. (TAT) is a French company active in aircraft  maintenance operations, express services and dry leasing  operations (i.e. provision of aircraft without crew). At  present it also controls TAT European Airlines (TAT E.A.), the  activities of which comprise principally the operation of air  transport services from France or within the French domestic  market both on its own behalf and on behalf of other carriers  under wet-lease agreements (i.e. provision of aircraft with  crew) and training services.  II. JOINT VENTURE  5. <ind> BA  will acquire a 49.9% interest in TAT E.A., the  remaining 50.1% will continue to be held by TAT. By virtue of  the Acquisition Agreement BA is also granted an option to  purchase the outstanding shares at any time up to 1st April  1997 and TAT is granted an option to require BA to do so on 1st  April 1997. Since it is not certain whether these options will  be exercised, the possible second transaction will not be taken  into account for the assessment of the operation that is  currently taking place.  6. <ind> According to the Shareholders' Agreement, the Board of  TAT E.A. will have nine members, of whom five will be nominated  by TAT and four by BA. The President and the Director General  of TAT E.A. (who currently hold the same positions in TAT) have  been confirmed in their functions for an inital term of two  years with the consent of BA. The President shall not have a  casting vote.  7. <ind> The Shareholders' Agreement also provides that major  decisions can only be taken by the Board if at least one TAT  director and one BA director vote in favour. These are i.a.  proposals affecting the company capital, proposals to amend the  statutes of the company, the election or removal of the  President or Director General, any changes to the agreed  Business Plan and any material commitments or contracts not  provided for in, or consistent with, the Business Plans.  8. <ind> The Business Plan, which regulates in detail the  commercial policy of TAT E.A. between 1993 and 1996, has been  agreed between TAT and BA. It sets forth, inter alia:   <tab> i) <ind> the routes TAT E.A. will serve and the planes  and timetables with which it will operate;  <tab> ii) <ind> the fleet plan;  <tab> iii) <ind> projections for the number of passengers to  be carried and the yield to be achieved;  <tab> iv) <ind> the strategy on international routes.  9. <ind> As a result of the above mentioned elements, it can be  concluded that TAT E.A. will be jointly controlled between BA  and TAT.  III. CONCENTRATION  10. <ind> TAT E.A. will perform on a lasting basis all the  functions of an autonomous economic entity. In this respect,  all TAT's activities related to air transport services, wet- lease operations and training services have been transferred to  it, together with the necessary assets and personnel. With  respect to the use of certain premises and the dry-lease of an  aircraft that belong in both cases to TAT, these relationships  have been regulated by specific contracts in order to guarantee  the independence of TAT E.A..   <ind> Regarding the duration of the joint venture, if BA does  not acquire the remaining 50.1% of TAT before 1st April 1997,  the agreement will cease on 1st April 1999. In this case  therefore, the joint venture will exist for approximately six  and a half years. Such a period can be considered to be  sufficiently long to bring about a lasting change in the  structure of the undertakings concerned, in particular in a  sector such as air transport which faces at present rapid and  important legal and economic changes.  11. <ind> As far as the competitive relationships between TAT  and BA and between TAT and TAT E.A. are concerned, with the  transfer of TAT's air transport activities to TAT E.A. the  former has withdrawn from this market and retained only its  operations in the field of dry-lease of aircraft, aircraft  maintenance and express services:    <tab> i) <ind> Dry-leasing consists of providing aircraft to  companies that are authorised to act as airlines and that have  the other necessary elements to operate them, such as their own  crew. This activity is thus different from the wet-leasing  service offered by TAT E.A., i.e. the carriage of passengers or  goods on behalf of the lessee.   <tab> ii) <ind> In order to provide a repair and maintenance  service, a company must be licensed by the authorities in  relation to each type of aircraft and to each type of repair  and maintenance that it wishes to undertake. In this respect,  the repair and maintenance of aircraft for which TAT (through  its subsidiary LAB) is licensed relates mainly to those of a  capacity below 120 seats. In contrast to this, BA's maintenance  activities concern aircraft of a different type and of a much  higher capacity.   <tab> iii) <ind> TAT's express services are carried out mainly  by road, and to a lesser extent by air and they are usually  confined to the French territory. BA is principally active in  providing such services to the long-haul markets and is not  present in the French domestic market.   <ind> It can therefore be concluded that the operations  retained by TAT are not only distinct from the provision of air  transport services as such, but also from the other activities  carried on by BA and TAT E.A.. Furthermore, it does not seem  economically reasonable that after having transferred the air  transport operations including traffic rights and substantial  assets such as planes - to the joint venture, TAT would try to  re-enter this market on its own. The consequence is thus that  TAT cannot be regarded as an actual or potential competitor of  either TAT E.A. or BA.  12. <ind> With respect to the competitive relationship between  BA and TAT E.A., the parties have agreed that BA will have a  substantial and growing influence over the way in which the  joint venture will be run and developed. As a matter of fact,  the need for TAT E.A. to become part of a larger international  transport operation played a decisive role in TAT's decision to  enter into this arrangement.    <ind> BA's input has already been reflected in the Business  Plan, which regulates in detail the strategy to be followed by  TAT E.A. until 1996 (see point 8). The reason for such  influence derives from BA's wide experience in the air  transport sector, which will be very useful in developing TAT  E.A., and at the same time will enable both airlines to attain  synergies by integrating certain activities.   <ind> This is confirmed by the fact that a Commercial Director  will be seconded from BA with the specific responsibility of  achieving the cost and revenue synergies targeted in the plan,  as well as the full range of commercial, marketing and sales  objectives.   <ind> As a result, BA, which is the only party that remains  active in the market of TAT E.A., will play a leading role in  the management of this joint venture.   13. <ind> The acquisition by BA of joint control of TAT E.A.  does not therefore have as its object or effect the  coordination of the competitive behaviour of undertakings which  remain independent. This conclusion however does not alter the  powers conferred on TAT by virtue of the Agreements with  respect of its joint-control of TAT E.A..   <ind> The present transaction therefore constitutes a  concentration in the sense of Article 3 of Regulation 4064/89.  IV. COMMUNITY DIMENSION  14. <ind> The present operation has a Community dimension  within the meaning of Article 1(2) of the Regulation. The  combined aggregate worldwide turnover of BA and TAT exceeded  8.000 million Ecu in 1991.   <ind> Regarding the Community-wide turnover of the parties,  three methods of allocation of turnover in the case of airlines  have been proposed by the Commission in previous decisions [See  case N  IV/M130 - Delta Air Lines/Pan Am and Case N  IV/M157  Air France/Sabena.]. In the case of TAT, since all the air  transport services it operated in 1991 - in addition to most of  its other activities - were carried out within the Community,  the results for the EC with all methods remain basically the  same. Under the three of them both BA and TAT attained a  Community-wide turnover of more than 250 million Ecu in 1991,  of which they did not achieve more than two-thirds within one  and the same Member State.  V. <ind> COMPATIBILITY WITH THE COMMON MARKET  15. <ind> The core business of BA and TAT E.A. is scheduled air  transport of passengers and freight. The other activities  (engineering and maintenance, training, catering, etc) have  been developed in connection with the air transport service as  such. BA has a very extensive network in the British domestic  market and in medium and long-haul routes usually from the  United Kingdom to the five continents. TAT E.A. is principally  a French domestic carrier, as  it serves 32 destinations in  France and 10 other destinations in Europe.  16. <ind> The long standing international legal framework of  air transport has traditionally prevented air carriers from  offering domestic air transport in other  countries but their  own. This situation is expected to change in the Community with  the third package of liberalistion measures that enters into  force on 1st January 1993, in particular once the access to  cabotage rights comes fully into effect on 1st April 1997.  17. <ind> However, as a result of the traffic patterns derived  from the legislation in force so far, BA is not present at all  on the French domestic routes, where TAT accounts for 3,8% of  the overall scheduled traffic (in terms of total number of  passengers carried in 1991). It does not seem necessary,  therefore, to describe in detail the relevant market(s) and the  routes it comprises. The main airline operating in this market  is by far Air France (directly or through Air Inter) with an  84,9% share of the overall number of passengers transported on  domestic routes.   <ind> Consequently, the present transaction does not lead to  any overlap with respect to TAT E.A.'s domestic routes, its  effect being that BA will have a limited access to the French  domestic network and certain possibilities to feed its  international operations from France.  18. <ind> With respect to TAT E.A.'s international services, as  they all have France as point of departure (or destination),  there is no overlap in any of them with those offered by BA,  except for two routes between France and the United Kingdom.  These are: Paris-London and Lyon-London.  19. <ind> In the air transport sector, the definition of the  relevant market has to start from the route itself, or a bundle  of routes to the extent that there is substitutability between  them according to the features of each case. Other factors that  could prove to be relevant are the structural conditions  prevailing at airports and their capacity, as well as the  impact of an extensive or high volume network in a given  geographical area. The substitutability between routes depends  on a number of factors such as the distance between the point  of origin and the point of destination, the distance between  the different airports situated on each side of the route or  the number of frequencies available on each route [See Decision  N  IV/M157 - Air France/Sabena, point 25.]. In the case under  examination, the short distance between Paris and London and  the number of frequencies available show that it is quite  unlikely that a passenger would consider doing the journey  through some intermediate point. In the case of Lyon-London, it  is conceivable that a passenger would consider going through  Paris for reasons such as time schedule, but this seems to be  the exception. As a general rule each city-pair could be  considered as a market.   20. <ind> In the present transaction the question of  substitutability between airports is of considerable  importance. On the Paris-London route all airlines present  operate from Charles-de-Gaulle in Paris but on the London side  a variety of airports are used: Heathrow (2.7 million  passengers per year), Gatwick (0.5), City (0.1) and Stansted  (0.2).   <ind> British Airways is mainly operating the Paris-London  route from Heathrow, but after the acquisition of Dan Air it  now also operates from Gatwick. TAT serves this route only from  Gatwick. None of their main competitors are present at Gatwick:  Air France (Heathrow), British Midland (Heathrow) and Air UK  (Stansted).   <ind> Depending on whether the traffic between London and  Paris is taken as a whole or by airport, the impact of the  transaction would be the following:   LONDON - PARIS [*] London (overall traffic) - Paris <tab> Gatwick - Paris <tab>  Heathrow - Paris British Airways (including Dan Air)  <tab> 49.5%  <tab> Dan Air  (BA)  <tab> 81.6%  <tab> No increase of market share  <tab>   <tab>  TAT  <tab>  17%  Air France  <tab> 32.9% British Midland  <tab>  9.4% <tab>  <tab>  Air UK  <tab>  3.7% <tab>  <tab>  TAT  <tab>  2.7% <tab>  <tab>  Brymon  <tab>  1.1% <tab>  <tab>  Others  <tab>  0.6% <tab>  <tab>  BA / TAT  <tab> 52.2%  <tab> BA / TAT  <tab> 98.6%  <tab>   [*:Market shares calculated on the basis of the 1992-93  projection provided in the notification. These figures are  consistent with the data provided by competitors.]  As to London-Lyon, two airports are used on the London side:  Heathrow (186 thousand passengers per year) and Gatwick (28  thousand). BA and AF are only operating from Heathrow, whereas  TAT is only present at Gatwick. There is no other competitor.  Depending on whether the traffic is considered as a whole or by  airport, the effect of the transaction would be the following:  LONDON - LYON [*] London (overall traffic) - Lyons  <tab> Gatwick - Lyon  <tab>  Heathrow - Lyon British Airways  <tab> 45.3%  <tab> TAT  <tab> 100%  <tab> No  increase of market share Air France  <tab> 41.4%  <tab>  <tab>  TAT  <tab> 13.3%  <tab>  <tab>  BA / TAT  <tab> 58.6%  <tab> BA / TAT  <tab> 100% <tab>   [*:Market shares calculated on the basis of the 1992-93  projection provided in the notification. These figures are  consistent with the data provided by competitors.]  21. <ind> In order to decide on the possible substitutability  between Heathrow and Gatwick - the two relevant airports in  this transaction - the following facts have to be considered:   <tab> i) <ind> Although they have a different geographical  situation in London, the access facilities could be regarded as  comparable.    <ind> ii) <ind> Interlining agreements exist between all the  companies operating Paris-London or Lyon-London services -  regardless of the airport.    <ind> iii) <ind> The passenger patterns are different: a  higher proportion of business travellers go to Heathrow.   <ind> iv) <ind> Yields at Gatwick are lower because of the  higher level of tourist class passengers.   <ind> v) <ind> Due to its bigger size and the higher level of  incoming and outgoing flights, Heathrow offers better  possibilities for connections.   <ind> For the routes concerned, a certain degree of  substitutability, in particular for passengers whose final  destination is London, can be considered to exist. Therefore,  although an overall analysis of the London market would seem to  be more appropriate, the fact that both airports are congested  because of the absence of slots shows that this  substitutability does not necessarily play. Therefore, in the  present case, the analysis of both routes will take account of  the structural conditions prevailing at Gatwick and Heathrow  and the capacity of these airports. In this respect, it is  important to note that BA holds a substantial part of the total  slots at Gatwick on average - which can amount up to 28.5% in  peak weeks - and at the same time 38% of the total slots at  Heathrow. Furthermore,  it will be the only airline which will  be able to operate both routes from both airports.  22. <ind> When examining the two routes in question, the  following elements should be taken into account:   <ind> i) <ind> The presence of AF on both routes and of other  competitors, such as British Midland, on the London-Paris route  reflects a certain degree of competition.   <ind> ii) <ind> Demand is expected to increase in the future  at least by some 5% p.a. on the Paris-London route [Despite the  opening of the Channel tunnel], whereas a substantially higher  growth rate is expected for the London-Lyon route.   <ind> iii) <ind> With the Third Package of liberalisation  measures, any Community carrier could in principle start a new  service from Paris or Lyon to London.  23. <ind> However, other factors indicate that the position of  BA and TAT as a result of the transaction may significantly  impede competition and that the above mentioned elements will  not play a decisive role if the service cannot be increased  because of the absence of slots. This constitutes a necessary  prerequisite for competition because new entry requires a  sufficient number of slots. Therefore, the Commission has  examined in detail the situation in terms of slots at the  airports concerned.  24. <ind> On the French side there are available slots at  Charles-de-Gaulle in Paris and at Lyon airport.   <ind> On the London side, the airport directly affected by the  present transaction is Gatwick [TAT does not operate these  routes from Heathrow], which, according to the present time- schedules, is already congested during peak times for the next  summer season and therefore there remain very few slots  available. This constitutes a barrier to entry to the London  market as a whole, since Heathrow is totally saturated and the  second choice, Gatwick, would not be open to a newcomer. The  fact that it is congested at peak weeks prevents an increase of  the frequencies or the creation of a stable regular service for  the whole season.  The two remaining airports (City and  Stansted) are clearly much less relevant for developing a large  scale service.    <ind> The effect of the absence of slots as a barrier to entry  is particularly true for the Gatwick-Paris route, since the  overall number of passengers from this airport (550.000)  together with the extensive service offered by BA and TAT  implies that a new entrant needs to compete with a sufficient  number of return flights reasonably spread throughout the day.   <ind> The current situation on Gatwick-Lyon is substantially  different, since this service did not exist until TAT created  it in April 1992. Although the projection of the traffic for  the first complete year (1992-1993) is only 28.000 passengers,  this is due to the fact that this service is very new but a  considerable potential for expansion is foreseen. Should a  substantial part of the increase of traffic on the overall  London-Lyon route be attracted to Gatwick, the interest and  likelihood of entry to this airport would increase. At that  moment, a problem of availability of slots could constitute a  major barrier to entry.  25. <ind> In order to meet this concern, and in particular to  facilitate new entry, the parties have entered into a  commitment vis-a-vis the Commission and the airport coordinator  (Airport Coordination Ltd), which regulates the allocation of  slots at Gatwick. According to this commitment which will be  valid until 1st April 1997:   <tab> i) <ind> As far as the route Gatwick-Paris is concerned,  when a carrier(s) wishing to start or increase this service  does not obtain the necessary slots from the airport  coordinator, BA will make a maximum of 12 slots available in  order to enable the operation of six additional daily  frequencies (return flights) reasonably spread during the day.   <tab> ii) <ind> As far as the route Gatwick-Lyon is concerned,  should traffic reach a threshold of 40.000 passengers  transported, when a carrier(s) wishing to start or increase  this service does not obtain the necessary slots from the  airport coordinator, BA will make up to 4 slots available in  order to enable the operation of two additional daily  frequencies, one in the morning and one in the afternoon.   <ind>  <ind> The full text of the above mentioned commitment  is annexed to the present decision and constitutes an integral  part of it. The Commission considers that these commitments  eliminate the problem of market entry.  26. <ind> On the basis of the above, and taking into account  the commitment described on point 25, the proposed transaction  does not create or strengthen a dominant position as a result  of which effective competition will be significantly impeded in  the common market or in a substantial part of it.  VI. <ind> ANCILLARY RESTRAINTS  27. <ind> Non competition clause   <ind> For the period of 5 years following the completion date,  TAT and its affiliates shall not engage directly or indirectly,  in France or in any other destination where TAT E.A. operates,  in any business that competes with TAT E.A.'s business without  the agreement of BA. This clause reflects the withdrawal of TAT  from the market and can therefore be seen as a restriction  directly related and necessary to the implementation of the  concentration.  28. <ind> Maintenance services   <ind> TAT E.A. will give priority for its maintenance services  to TAT's subsidiary LAB for a period of 10 years. In addition,  TAT E.A. undertakes not to create another maintenance facility  for the services which are subject to the agreement.   <ind> As LAB currently achieves more than half of its annual  repair and maintenance turnover in connection with aircraft  belonging to TAT E.A., the continuation of its current activity  has to be regarded as an economic necessity. Therefore, this  clause is considered to be directly related and necessary to  the implementation of the concentration. However, its duration  must be limited to the life of the joint venture which is the  subject of the present decision (see point 10, second  paragraph), i.e. 1st of April 1999.  29. <ind> Use of common computer and other services, and  certain premises.    <ind> As all TAT's computer services have been transferred to  TAT E.A., TAT and its subsidiaries will continue to use them at  cost price for 3 years tacitly renewed for an undetermined  period. At the same time, various agreements have been entered  into between TAT E.A. and TAT's subsidiaries which provide for  the common use of vehicles, the secondment of employees, etc.  They will remain in force for two years. In addition, a part of  certain premises transferred to TAT E.A. will be sublet to  TAT's subsidiaries and vice versa for a period of 3 years that  will be tacitly renewed for a similar period. Finally, TAT E.A.  will use 5 Boeing 737 belonging to TAT in order to provide a  wet-lease service, to Société d'Exploitation de l'Aéropostale  for an initial period of two years.    <ind> The above mentioned agreements, intended to ensure the  independence of TAT E.A., are directly related and necessary to  the implementation of the concentration. However, their  duration must be limited for the same reason as indicated in  point 28, to the 1st April 1999.  30. <ind> Licence to use the TAT name   <ind> TAT has granted to TAT E.A. a 20 year royalty-free  licence to use the TAT name. Such a clause, limited to 1st  April 1999, is in line with Commission notice of 14.10.1990 and  can therefore be accepted.  VII <tab> FINAL ASSESSMENT   <ind> Based on the above findings, and taking into account in  particular the commitments entered into by the parties, the  Commission has come to the conclusion that the proposed  operation does not raise serious doubts as to its compatibility  with the common market.   <ind> This decision is adopted in application of Article 6(1)b  of Council Regulation N  4064/89.  For the Commission,  ANNEXES  FIRST LETTER  SENDER: BRITISH AIRWAYS Speedbird House (5223) PO box 10 Heathrow Airport (London) Hounslow TW6 2JA David Holmes CB Director of Government & Industry Affairs  RECIPIENT: Mr C D Ehlermann Director General Competition Directorate Commission of the European Communities 200 rue de la Loi 1049 Brussels Belgium  REFERENCE: tatfin/cme 27 November 1992   Dear Mr Ehlermann  CASE NUMBER IV/M.259 - BRITISH AIRWAYS/TAT  Although British Airways Plc ("BA") considers that there is no  competition issue raised by its acquisition of a share-holding  in TAT European Airlines S.A. ("TAT"), without prejudice to its  position.  BA will make arrangements to provide certain slots  at Gatwick should they be necessary in order for new entry to  take place or for the frequency to be increased on those routes  which are currently served out of Gatwick by TAT and hereby  gives the undertakings, with respect to those routes, set out  in the attachment to this letter and in the letter to the  Managing Director of ACL, the company responsible for co- ordination of Gatwick, setting out the slot arrangements, a  copy of which accompanies this letter.  I also attach a copy of  the letter from the ACL confirming its willingness to act as  envisaged in our letter.  These undertakings will take effect from the date of the  Commission's decision under Article 6(1)(b) of the EC Merger  Regulation.  Yours sincerely,   David Holmes   Attachment to letter dated 27 November 1992 to The Director  General for Competition from British Airways Plc   Undertakings given by BA and TAT in connection with the  acquisition of a shareholding in TAT by BA  BA and TAT will enter into an interline agreement in respect of  the route concerned with any new entrant on the routes Gatwick  -Paris (CDG) and Gatwick - Lyon for a period of five years from  the date of such new entry.  Such agreements shall be on  reasonable terms in accordance with the conditions which are  normal in the industry (in particular as to credit-worthiness  and reciprocity).  If, prior to 1 April 1997, a new entrant commences services on  each or either of Gatwick - Paris (CDG) and Gatwick - Lyon  routes, BA and TAT will ensure that the aggregate number of  frequencies operated on the relevant route or routes by BA, any  of its subsidiaries and TAT will not be increased above the  base level, save that the frequency may be increased if and to  the extent that the new entrant or any other airline on the  route in question operates a higher frequency or if the total  frequency of all carriers combined on the route has grown by a  percentage that is lower that the percentage growth in the  number of passengers carried on the route over the period since  the new entrant commenced services.  The base level shall be  the level of frequencies currently planned by BA en TAT for  Summer 1993 or the frequency operated at any time in the twelve  months prior toe the new entrant's commencing services on the  route, whichever is the higher.  This undertaking shall apply  for a period of four years from the date a new entrant  commences services on the relevant route.  BA and TAT will offer to those competitors on the Gatwick -  Paris (CDG) route who so request, and who do not directly or  indirectly participate in a Frequent Flyer Programme, the  opportunity to participate in Their FFP under reasonable and  non-discriminatory financial conditions.  This engagement is  strictly limited to the present operation and does not prejudge  the position of BA and TAT in this field.  It is also  understood that such a commitment will terminate when a  Community regulation concerning FFP is adopted.  Should circumstances or conditions change from those now  pertaining so that BA or TAT wishes to depart from the  undertakings set out in this letter or in the letter to the  Gatwick co-ordinator which is attached, BA and TAT, whichever  is relevant, shall be free to discuss the matter with the  Commission.  BA and TAT will not depart from any of these  undertakings except to the extent that the Commission confirms  acceptable.    SECOND LETTER  SENDER: BRITISH AIRWAYS PO Box 10 Heathrow Airport (London) Hounslow TW 6 2JA  RECIPIENT : Mr P Morrisroe Managing Director Airport Coordination Limited Axis House 242 Bath Road Hayes Middlesex UB3 5AY  27 November 1992   Dear Mr Morrisroe  BRITISH AIRWAYS INVESTMENT IN TAT EUROPEAN AIRLINES  Arrangements for Slot Transfers  British Airway understand that concern has been expressed by a  number of airlines as a consequence of the investment by BA in  TAT about BA's position on the London - Paris (CDG) and London  - Lyon routes.  Without accepting the validity of thus concern  BA is willing, nevertheless, to take certain steps to  facilitate the introduction of services by another airline on  each of these routes.  The purpose of this letter is to set out how BA proposes to  give effect to this and to ask you to confirm your willingness  to take the action necessary.  Set out below are what I  have described as undertakings.  They  set out the commitment which BA is giving to help to facilitate  the introduction of new competition on the routes.  BA will be  bound by this commitment until 1 April 1997 unless the  investment currently envisaged in TAT doe nos proceed or if it  does proceed unless and until the Commission shall confirm that  it is acceptable for BA to amend or withdraw the commitment.   The undertakings are as follows.  1. <ind> In respect of the route Gatwick - Paris (CDG), BA will  make available to carriers, not part of the BA group, which  wish to commence or to increase a scheduled service on the  route, such slots at Gatwick as may be necessary to enable  those carriers to provide that service throughout the year. BA  shall only be obliged to make available slots in accordance  with this undertaking to the extent of an aggregate six round  trips in any day.  Each carrier will be limited to the number  of slots needed to bring that carrier's frequency up to six  round trip in a day.  Slots will be made available only if the  carriers concerned have made all reasonable efforts to obtain  slots for their services through the normal workings of the  slot allocation procedures and have failed to obtain them  within thirty minutes (either way) of the time requested.  BA  will make available slots to the carriers concerned within  thirty minutes (either way) of the requested times, provided  that BA holds such slots and save that BA will not be obliged  to make available a slot within one and one half hours of a  similar slot already held by a carrier for use on the route.  2. <ind> In respect of the route Gatwick - Lyon.  BA will make  available to a carrier, not part of the BA group which wishes  to commence or to increase service on the route, slots at  Gatwick as may be necessary to enable that carrier to provide,  throughout the year, up to two round trips in any day.  BA  shall not be obliged to make available slots unless:   <ind> (i) <ind> the number of passengers carried on scheduled  services by all airlines serving the route equals  or exceeds  40,000 in the twelve month period preceding the request; and   <ind> (ii) <ind> the carrier concerned has made all reasonable  efforts to obtain slots for its service through the normal  workings of the slot allocation procedures and has failed to  obtain them within ninety minutes (either way) of the time  requested.  To the extent that this is the case and to the  limit of slots necessary to bring the carrier's frequency up to  two round trips in any day.  BA will make available slots to  the carrier concerned within ninety minutes (either way) of the  requested times, provided that BA holds such slots and save  that BA will not be obliged to make available two similar slots  less than five hours apart.  3. <tab> In respect of each the above undertakings:   <ind> (i) <ind> the obligation to make slots available shall  expire at the end of Winter 1996/97 season;   <ind> (ii) <ind> it shall be a condition that the slots made  available by BA shall be used only for the purpose of operating  on the route in respect of which they were made available and  the receiving carrier will be expected to give an undertaking  to BA so to use them until the end of the Winter 1996/97 season   or for two years after receiving them, whichever is the later,  unless the carrier withdraws from the route;   <ind> (iii) <ind> the undertaking to BA expected from the  receiving carrier will not prevent it from exchanging those  slots for others closer tot the times it originally requested  but that undertaking shall apply instead to the slots so  obtained;   <ind> (iv) <ind> the undertaking given by the receiving  carrier will require it, if it ceases to operate on the route  in question during the period of its undertaking, to take such  steps as it can in order that the slots made available to it  can be returned to the Coordinator who will if possible  transfer them to a replacement carrier, not part of the BA  group, on the route and to avoid, so far as possible, any  action which would prevent this;   <tab> (v) <ind> BA shall not be obliged to make slots  available during any season unless a request has been made by  an airline entitled to benefit from these undertakings within 1  month after the closing of the IATA scheduling meeting at which  the co-ordination of slots for that season has been undertaken,  save that for Summer 1993 season BA will make slots available  if required by these undertakings provided a valid request is  made within 1 month after these undertakings have been made  public;   <tab> (vi) <ind> for the purpose of these undertakings the BA  group shall comprise BA and all airlines in which BA has a 5 %  or greater share-holding, either directly or indirectly;   <tab> (vii) <ind> 'similar slots' mean slots to be used for  the same purpose (i.e. to take-off or to land);   <tab> (viii) <ind> BA will make available to a carrier to  which it has made available slots in accordance with these  undertakings in one season the same slots, or as near to the  same slots as it is able, in the following season, if it is  necessary for the carrier to be able to continue its service  (the slot shall be defined in local time for the purpose of  this subparagraph); and   <tab> (ix) <ind> BA will take account of the operational needs  of any carrier to which slots are given, in view of the purpose  of these undertakings being to facilitate the operation of a  viable commercial service; in this context BA recognises the  desirability of meeting any requirement that turn-round times  be kept within a period of 90 minutes on routes such as these.  These undertakings will be given effect as follows:  A carrier wishing to avail itself of the benefits of these  undertakings shall write to BA requesting it to make slots  available in accordance with the undertakings.  Providing: the  undertaking in respect of the route in question has not already  been fulfilled; the request has been made within the time  required; the carrier making the request has made very normal  effort to obtain the slots necessary for its planned operation  on the route which, save in respect of the season Summer 1993,  must include a application to the coordinator for slots by the  due date prior to the slot meeting for the season concerned;  and, if the request is in respect of Gatwick - Lyon, the number  of passengers carried by scheduled services on the route in the  most recent twelve month period for which data is available was  at lease 40,000; then BA will make slots available as  necessary.  Should there be two or more requests made during  the same period which could not all be met within the limits of  the slots which BA will enter into discussions with the  carriers with a view to reaching agreement as to how the  available slots shall be distributed.  Should it be impossible  to reach agreement, then the issue shall be resolved by an  independent arbitrator, whose appointment will be agreed by the  parties concerned.  In the event that o agreement is reached  within a reasonable time.  BA will nominate an arbitrator,  whose appointment will fall to be confirmed by or on behalf of  the Director General for Competition of the European  Commission.  The carrier receiving the slots shall give in  writing the undertaking set out in (ii) to (iv) above.  Having reached agreement with the receiving carrier BA will  then ask the coordinator to transfer of the slots.  I should be grateful if you would confirm that you would be  able and willing to approve a slot transfer agreed between  carriers as set out above.  Yours sincerely,    C M Allen Manager Competition Policy and Licensing   THIRD LETTER  SENDER: AIRPORT COORDINATION  Our ref.: PM/cjv/pm4107  23rd November 1992   RECIPIENT : Mr. Chris Allen Manager, Policy Competition and Licensing British Airways Room X236 Speedbird House S234   Dear Chris,  Thank you for a copy of the (proposed?) arrangement which sets  out BA's undertakings regarding the transfer of slots from BA  to another carrier on the Paris and/or Lyon routes.  The transfer of slots described in the letter from one carrier  to another is within the IATA guidelines and, I believe, within  the terms of the emerging Code of Conduct and Block Exemption  regulations.  We will take the responsibility of bringing the aspects of this  agreement within our control into effect so long as it is  within our normal coordination parameters eg. Terminal  capacity.  We are also prepared to monitor the use of and  changes to such slots.  I am sure you are aware however that having transferred the  slots to another carrier we would be unable to enforce any  restrictions on their future use as long as this was within  coordination parameters.  I can also confirm that, to the extent consistent with the  regulations and guidelines under which we carry out the  coordination at Gatwick, we would be willing to hold, for a  reasonable period, slots in abeyance for reallocation to a  successor carrier which have been transferred by you in  accordance with your undertakings and subsequently released by  the recipient airline.  It has not been possible within the time available to brief  either the Scheduling Committee or the Airport Operator on the  proposal.  We shall endeavour to do as quickly as possible.  Best wishes,  Peter Morrisroe Managing Director Airport Coordination Limited