COLIN BAKER LONDON
The European Commission (EC) has announced its intention to close its investigations into the Star Alliance and KLM-Northwest partnerships that were initiated back in July 1996. Third parties have until the end of August to notify Brussels of any objections.
As part of the Star investigation, which covers the relationship between Lufthansa, SAS and United Airlines, carriers are expected to have to make slots available to competitors on certain key routes where they dominate.
Stephen Dolan, senior associate at international law firm Norton Rose, sees the EC decision as an acceptance by the competition authorities in Brussels that alliances are here to stay. "It is fundamental to any future consolidation that they accept the idea that alliances compete on a network basis," he says. "Things have changed since 1996. Alliances were relatively new then and they weren't terribly settled. There is more stability now."
The alliance between SkyTeam members Delta Air Lines, Air France and Alitalia is expected to receive similar treatment. However, the alliance between oneworld partners American Airlines and British Airways that initially sparked the investigation may still face hurdles, Dolan believes. He points out that London's geographical proximity to the US east coast and its large origin and destination market could be an issue as passengers may not be willing to backtrack to get to the USA.
The original application for antitrust immunity from the two carrier's collapsed over demands from Brussels and Washington that American and BA surrender more slots at Heathrow than they were willing to give up. A similar bid earlier this year was scuppered by Washington before Brussels had an opportunity to give its verdict on the proposal.
Dolan says airlines have much to gain from the decision. "It allows large network carriers to do what they do best - moving large number of passengers through their hub and spoke networks," he says, adding that this will provide a crucial distinction between them and low-cost carriers.
Following hard on the heels of the EC decision will be the verdict of the European Court of Justice into the open skies deals struck between various member states and the USA in the late 1990s. The court is expected to rule these agreements invalid, a decision which, Dolan says, will complement the EC stance that competition is now focused on global alliance networks rather than on individual national markets.
Source: Airline Business
