Brussels, 14 July 2010
Antitrust: British Airways, American Airlines and Iberia commitments to ensure competition on transatlantic passenger air transport markets made legally binding
(see accompanying Memo/10/330)
The European Commission has made legally binding commitments offered by British Airways (BA), American Airlines (AA) and Iberia (IB), three members of the oneworld airline alliance. These commitments were offered in response to the Commission's concerns that the planned joint venture between BA, AA and IB may be in breach of EU antitrust rules and harm consumers on transatlantic routes. Under the commitments, the parties have notably offered to make landing and take off slots available at London Heathrow airport to facilitate the entry or expansion of competitors on routes between London and New York, Boston, Dallas and Miami. After a market test, the Commission concluded that the commitments offered were suitable to remedy the competition concerns and has closed its investigation.
Commission Vice-President in charge of competition policy Joaquín Almunia commented: "Today's decision will enable the airlines to put in place the transatlantic alliance they have long aspired to while ensuring that the around 2.5 million passengers that use the London-New-York and other affected routes each year continue to benefit from a choice of frequencies and competitive prices. The Commission cooperated closely with the US authorities, in particular the US Department of Transportation."
In September 2009, the Commission sent a Statement of Objections to BA, AA and IB (see MEMO/09/430). The Statement of Objections outlined the Commission's preliminary view that the extensive cooperation between the parties, which involves revenue-sharing and joint management of schedules, pricing and capacity on all routes between North America and Europe, may breach EU competition rules on restrictive practices (Article 101 of the Treaty, see MEMO/09/430).
The Commission's concerns focussed on likely consumer harm on six transatlantic routes, namely London-Dallas, London-Boston, London-Miami, London-Chicago, London-New York and Madrid-Miami. The parties will to a large extent act as a single entity on these routes, which would deprive the market of the competitive pressure that was previously exerted by them on each other and on other competitors. The remaining competitors would be unable to replace this competitive force, due to the parties' strong position on these routes and the difficulties that exist for players to enter the market. The most notable barriers to entry are the lack of peak-time slots at London Heathrow airport – which is amongst the most congested airports in the world – the parties' frequency advantage and their control of most connecting traffic on the routes.
The commitments proposed by the parties are primarily aimed at enabling competing airlines to start operating or increase their services on the affected routes by lowering barriers to entry.
Concretely, the parties offer to make available landing and take-off slots at London Heathrow or London Gatwick airports, at the entrant's choice, on routes to Boston, New York, Dallas and Miami. The number of slots will allow one or more competitors to operate a total of 49 more return flights a week between London and the four affected destinations in the US.
On the London-New York city pair, the parties also propose to provide the competitor with slots at New York John F. Kennedy airport.
In addition, BA, AA and IB undertake to provide access to their frequent flyer programmes on the relevant routes, allowing passengers of new entrants approved by the Commission to accrue and redeem miles on the parties' frequent flyer programmes.
The parties also propose to allow fare combinability and offer special prorate agreements in relation to the routes of concern, which would enable competitors to offer tickets on the parties' flights and facilitate access to connecting traffic.
Finally, the parties commit to submit data concerning their cooperation to the Commission at regular intervals, which will facilitate an evaluation of the alliance's impact on the markets over time.
These commitments will be binding on BA, AA and IB for ten years. To monitor the implementation of the commitments, a trustee will be appointed.
Throughout its investigation the Commission has been in close contact with the US Department of Transportation, which is conducting a parallel review under US rules.
The Commission decision, based on Article 9 of Regulation 1/2003 on the implementation of the EU competition rules, takes into account the results of the market test launched on 10 March 2010 (see IP/10/256). This decision does not conclude whether there has been an infringement of EU competition rules. It legally binds BA, AA and IB to the commitments they have offered and ends the Commission's investigation. If BA, AA and IB were to break their commitments, the Commission could impose a fine of up to 10 percent of each company's total annual turnover without having to prove a violation of the EU competition rules.
The non-confidential version of the decision will be made available under the case number 39596 once any confidentiality issues have been resolved.