The European Commission has adopted a decision that renders legally binding commitments offered by Air France/KLM, Alitalia and Delta, members of the SkyTeam airline alliance, to lower barriers to entry or expansion on three transatlantic routes. The Commission had concerns that the cooperation between these airlines may harm competition for all passengers on the Amsterdam-New York and Rome-New York routes and for premium passengers on the Paris-New York route, in breach of EU antitrust rules. After market testing commitments offered by Air France/KLM, Alitalia and Delta, the Commission is satisfied that in their final form they address its concerns. It has therefore decided to make them legally binding on these airlines for a period of ten years.
Commissioner in charge of competition policy, Margrethe Vestager said: “Airlines can cooperate to enlarge their network if it makes them more efficient and allows them to better serve their passengers. With today’s decision I want to ensure that passengers flying from Paris, Amsterdam or Rome to New York continue to benefit from competitive prices and choice. We have now concluded our reviews of the three major worldwide airline alliances – and are one step closer to a genuine level playing field in transatlantic aviation markets.”
In 2009 and 2010, Air France/KLM, Alitalia and Delta – members of the SkyTeam airline alliance – signed agreements establishing a transatlantic joint venture. The Commission had concerns that the extensive cooperation between the parties, involving profit-sharing and the joint management of schedules, pricing and capacity, might result in higher prices on the Paris-New York route (for premium passengers), Amsterdam-New York and Rome-New York routes (for premium and non-premium passengers). In addition, due to considerable barriers to entry and expansion, new and existing competitors would have been unable to challenge the ability of the joint venture to set and maintain prices above the level that would exist in a competitive market (i.e. their ‘market power’).
To address these concerns, the companies have jointly offered a set of commitments aimed at enabling competing airlines to start operating or extend existing operations on the routes in question, by lowering barriers to entry or expansion. In October 2014, the Commission consulted stakeholders on these commitments. In light of the results of the market test, the parties proposed some modifications and clarifications to the initial commitments.
Under the final commitments, the parties will:
- make available landing and take-off slots at Amsterdam, Rome and/or New York airports on the Amsterdam-New York and Rome-New York routes;
- enter into agreements which would enable competitors to offer tickets on the parties’ flights on the three routes (“fare combinability agreements”);
- enter into agreements which would facilitate access to the parties’ connecting traffic on the three routes (“special prorate agreements”);
- provide access to their frequent flyer programmes on all three routes;
- allow passengers of competitors who have no equivalent frequent flyer programme to accrue and redeem miles on the parties’ frequent flyer programmes; and
- submit data concerning their cooperation, which will facilitate an evaluation of the alliance’s impact on the markets over time.
The Commission found that the final commitments adequately address the competition concerns identified and has made them legally binding on Air France/KLM, Alitalia and Delta. An independent trustee will monitor the parties’ compliance with these commitments.
Article 9 of the EU’s Antitrust Regulation (Regulation 1/2003) allows the Commission to conclude antitrust proceedings by making commitments offered by a company legally binding. Such a decision does not reach a conclusion on whether EU antitrust rules have been infringed but legally binds the company to respect the commitments. If Air France/KLM, Alitalia or Delta were to breach the commitments, the Commission could impose a fine of up to 10% of the companies’ total annual turnover, without having to find a violation of the EU competition rules.
SkyTeam is one of the three world-wide airline alliances. Under its umbrella the member airlines enter into various cooperation agreements in relation to passenger and cargo air transport. In January 2012, the Commission opened a formal investigation into the joint venture between Air France/KLM, Alitalia and Delta, members of the SkyTeam airline alliance, relating to passenger transport on routes between Europe and North America.
In July 2010, the Commission accepted commitments by members of the joint venture within the oneworld alliance and made them legally binding, to ensure competition on transatlantic air passenger markets. Furthermore, in May 2013, the Commission accepted commitments by members of the joint venture within the Star Alliance and made them legally binding with the same objective.