EC FINALLY CLEARS TWO TRANSATLANTIC AIRLINE ALLIANCES

EC FINALLY CLEARS TWO TRANSATLANTIC AIRLINE ALLIANCES    After more than five years of examination, the European Commission has closed its probe into two major transatlantic airline alliances, known as the Wings alliance and the Star Alliance, saying that it is no longer concerned about a potential reduction in competition.
   In July 1996, the EC had decided to open, on its own initiative, proceedings into a number of transatlantic alliances in the aviation sector, including the Wings alliance between KLM and NorthWest, and the Star Alliance between Lufthansa, Scandinavian Airlines System and United Airlines.
   The EC said that the Lufthansa/SAS/United airlines “successfully addressed concerns about reduced competition on a number of routes between the German airport of Frankfurt and U.S. destinations.”
   In the case of the KLM/NorthWest alliances, no competition remedies were held necessary by the EC.
   Initially, in 1998, the EC found that the Lufthansa/SAS/United alliance would have significantly reduced competition on four transatlantic routes, on which the partners held combined market shares of between 56 and 95 percent.    However, the three Star alliance partners offered to surrender slots at Frankfurt airport to allow new air services (either direct or indirect) on the routes concerned.
   After receiving comments from the alliance partners and other interested parties and after an additional market investigation, the commission also concluded that indirect flights, under certain conditions, could constitute suitable alternatives to non-stop services on long-haul routes.
   Concerning the KLM/NorthWest alliance, the EC was initially concerned about its high market shares on the Amsterdam-Detroit and
Amsterdam-Minneapolis/St. Paul routes, where it holds collectively 88 percent and 78 percent of the market, respectively. But the EC concluded that this alliance will face competition from competitors providing substitutable indirect services. The commission also concluded that there were no structural barriers to entry in terms of slot constraints or regulatory barriers.
      “Airline alliances generally present benefits for the consumer, but regulators must ensure that they do not result in the elimination of competition on specific routes and we achieved that,” said European Competition commissioner Mario Monti.
   The EC’s investigation of both the Wings and the Star Alliance did not have a suspension effect on the agreements.
   “It is also in conformity with the earlier findings of the U.S. Department of Transportation in both cases,” the EC said.