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IP/07/1558

Brussels, 19th October 2007

Antitrust: Commission market tests commitments from eight members of SkyTeam concerning their alliance cooperation

The European Commission has invited comments from interested parties on commitments proposed by eight members of the SkyTeam airline alliance, namely Aeromexico, Alitalia, CSA Czech Airlines, Delta Air Lines, KLM, Korean Air, Northwest Airlines and Air France. These commitments are designed to meet concerns under the EC Treaty's ban on restrictive business practices (Article 81), raised in the Commission's Statement of Objections of 15 June 2006 (see MEMO/06/243). The Commission is concerned that the cooperation in passenger air transport services between these SkyTeam members may have negative effects for passengers on routes where they enjoy a strong market position and where barriers to entry are significant. To address these concerns, the parties have offered commitments designed to facilitate new entry on the routes in question. The parties mainly offer to make slots available at appropriate EU airports to allow competitors to operate new or additional services and to share their frequent flyer programs. A notice summarising the commitments and requesting comments from interested parties within one month, has been published in the EU Official Journal C245 of 19.10.2007.

SkyTeam is a worldwide alliance of airlines focusing on long-term strategic cooperation on passenger and cargo air transport services. Agreements concluded within SkyTeam on passenger air transport services cover routes between several thousand city pairs worldwide. For the majority of these routes, the parties' cooperation is unlikely to have negative effects on competition.

However, the Commission is concerned that cooperation agreed by Aeromexico, Alitalia, CSA Czech Airlines, Delta Air Lines, KLM, Korean Air, Northwest Airlines and Air France could infringe the EC Treaty's ban on restrictive business practises (Article 81) on a number of city pairs: Amsterdam-Detroit, Amsterdam-Minneapolis, Paris-Atlanta, Paris-Cincinnati, Rome-Atlanta, Milan-New York City, Paris-Prague, Milan-Prague, Rome-Prague, Amsterdam-Prague and Paris-Seoul. In view of the parties' strong market position together with the existing significant barriers to entry, anti-competitive effects would be likely to arise on these markets. The entry barriers include the limited availability of slots at the main EU airports, the parties' high number of frequencies, unmatched schedules and advantages of operating from their own hub airports, as well as the added value to customers of the ability to benefit from the parties' joint frequent flyer programmes and other incentive schemes (i.e. the network effects).

Following their reply to the Statement of Objections and subsequent discussions, the parties have offered to abide by a set of commitments which are designed to remedy the Commission's concerns. The parties mainly offer to make slots available at appropriate EU airports to allow competitors to operate new or additional services and to share their frequent flyer programmes. Moreover, the parties propose to conclude interlining agreements with new entrants, enter into special prorate agreements for so-called "behind and beyond traffic" on the intra-EU routes (these are agreements between two or more airlines on the apportionment of through-fares on journeys with two or more legs operated by different airlines) and facilitate inter-modal services (i.e. provision of air travel as part of an itinerary that includes surface transportation, such as by railway).

The parties also offer to establish a trustee to monitor the implementation of the commitments. The parties offer these commitments for five years on long-haul city-pairs to/from destinations in the US and for six years on all other city-pairs.

If the Commission's assessment of comments received were to conclude that the proposed commitments would solve the competition concerns, the Commission would adopt a so-called commitments decision under Article 9 of Regulation 1/2003.

Such a decision finds that there are no longer grounds for action by the Commission, without concluding whether or not there has been or still is an infringement. However, if the commitments given in the context of such a decision are broken, the Commission may impose on the party in question a fine of up to 10% of the total worldwide turnover without having to prove that there has been an infringement of antitrust rules.

If the result of the assessment of third parties' observations showed that the commitments offered would not be apt to remove the concerns expressed in the Statement of Objections, the Commission could pursue the procedure with a view to adopting a prohibition decision under Article 7 of Regulation 1/2003 requiring the parties to end their cooperation in its current form on the affected markets.
Details of the proposed commitments have been published in the EU's Official Journal (OJ C245, 19.10.2007, page 46) and are available on the Europa website:

http://ec.europa.eu/comm/competition/antitrust/cases/index/by_nr_75.html#i37_984


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