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EUROPEAN UNION ATTACKS AIRLINE ALLIANCES

The EU competition watchman has done it again.

This time he targeted the airline alliances in his crosshairs. To guarantee a fair amount of competition in transatlantic airtraffic, as he phrases it, and therefore to protect the passenger as final customer, van Miert has placed strict conditions for the alliance of Lufthansa and United Airlines and the planned association of British Airways (BA) and American Airlines (AA).

In the course of events BA and AA are supposed to give up 267 take-off and landing slots in London without any compensation. Furthermore both companies are bound to hand-over 25 weekly flights between the British capital and the US-destinations of Chicago, Dallas and Miami to weaker competitors during the next six months.

Lufthansa, SAS and United Airlines, the founding members of Star Alliance, will have to drop 108 slots in Frankfurt and 90 in Copenhagen. Additionally, the number of flights between Frankfurt and Chicago as well as Frankfurt and Washington must be reduced by up to 55 percent during the next six months.

The aim of these actions is to help new airlines to enter the market. But what are the consequences for the alliances?

There are hardly any decisive results for British Airways and American Airlines. Even with the restrictions in effect the coalition will still be the most powerful world-wide alliance in airtraffic.

Giving up slots does not pose a real problem to Lufthansa as well because the company is only required to give up its claims on the most requested schedule times if the competitors have not been able to find a slot by themselves, using the normal commission procedures. Frankfurt though, as it is known, has still got some margin left in this area.

More annoying is the surrender of routes. Practically this results in the give-away of hard earned market shares to competitors without a fight. Under these circumstances LH-CEO Weber rightly talks about expropriation.

But what positive use can the passengers draw from this reallocation?

It is to be feared that they will not receive too much benefit at all. What advantages is Mr. A due to encounter flying from Frankfurt to Chicago with a new airline, if he has to wait for a connection for six or seven hours, only because the connecting flight was not planable within an alliance network.

Furthermore, there may be passengers who like to be regular customers of a certain airline because they want to rely on a high level of flight safety, which carriers with Lufthansa's or British Airways' level of maintenance and fleet policy can guarantee.

Finally this is why Mr. van Miert has to face questions for the true motives of his actions, especially since the commission is aiming at more rigid restrictions for the European alliance partners than the US authorities are demanding of American airline companies.

More than a few experts imply that the commissioner is acting out of political motives rather than out of concern for a fair competition. It may appear that in reality he is trying to expand his own position and attempting to gain a Pan-European negotiation mandate for all future negotiations on airtraffic with the USA and other countries.

This may be justified in some part, because every national authority will have to give up traditional privileges on the way to a truly united Europe.

Though during this process, the more tedious but equally more rewarding dialogue would be more appropriate than mere revanchism.

There would be time enough during the now following period of complex negotiations.

An all European aviation policy following the pattern of the historic Echternacher jump procession (three steps forward, two steps back), does not appear prospective for the future and is certainly not competitive.

From page 4 of FLUG REVUE 9/98

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