In Europe, a volley of legal attacks by airlines on their competitors has been launched. In the US, hard on the heels of KLM's spat with alliance partner Northwest, USAir has declared legal war on its partner, British Airways.
If your aviation lawyer is not involved in either of these cases, he or she might be busy with the 'dirty tricks' case between Virgin and British Airways, as it continues to meander slowly through the intricacies of the US legal system. Or they might be tied up with the action against Air France's state aid, or the liability issues surrounding TWA Flight 800, or the safety allegations against ValuJet. Or they might simply be lobbying, either in favour of or against the BA/American alliance or the United/Air Canada antitrust application.
Europe's wave of predatory behaviour allegations has accelerated. UK startup EasyJet has commenced proceedings against KLM, alleging predatory pricing. Another startup, World Airlines, claims that KLM affiliate Air UK has dumped capacity on the London/City-Amsterdam route and offered World inducements to withdraw. Ironically, KLM was one of the carriers which complained that Air France had broken the terms of its state aid approval by being the first to cut fares on certain routes. Meanwhile, Belgium's VLM is accusing British Airways carrier CityFlyer Express of predatory pricing, after CityFlyer won its claim that VLM had received an illegal state subsidy.
Most of these complaints have yet to be heard, but the Commission took no action against Air France because Air France withdrew its price-leading fares when the Commission pointed them out.
When a host of airlines, large and small, state-aided and privately funded, are fighting it out in a deregulated marketplace, there are bound to be disputes. The problem is that the burden of proof is heavy, and there is no mechanism for resolving disputes quickly.
How do you define the word 'predatory'? How can a company prove that another's actions fall into this category? In such a complex business, how can a direct causal link between one action and the end result be established? Which Article of the Treaty of Rome should plaintiffs rely upon? Should the complaint be made to the European Commission? If not, which court is appropriate, and will the case be heard before too much commercial damage is done?
It is vital that small carriers can defend themselves adequately when larger ones act unfairly. It is equally vital to ensure that state-aided carriers do not misuse the funds which their governments so generously make available. Yet in a deregulated marketplace players need to be free to make appropriate commercial decisions without fear of legal reprisals (unless they really have broken the law). The present legal framework, consisting of both national and crossborder systems, seems hardly adequate for the task.
USAir's action against BA poses different questions. It is natural for USAir to be concerned that BA's proposed alliance with American will leave the Washington-based carrier out in the cold. If the alliance was really working as well as the partners claim, and if there was a close dialogue between the two chief executives, perhaps USAir's doubts could have been assuaged. Instead, USAir is now in the invidious position of fighting a legal battle with its largest shareholder and most important alliance partner.
Each side has its legal arguments. USAir: our agreement was exclusive and a BA/American link breaks it. BA: we have conformed with the agreement precisely. USAir: the BA/American deal damages our interests so we have to defend ourselves. BA and American: this deal will be to your advantage, so why fight it? There is also a major imponderable: the US or UK authorities might permit the BA/American link but insist that BA and USAir dissolve their partnership as a condition, making a massive difference to USAir's case.
This is yet another illustration of the risks attached to alliances and partial equity stakes. In the fickle world of business, partnerships can go sour and dissolve as quickly as they can be created. In the long run, there is only one answer: create a global legal framework which will allow airlines from different continents to merge properly, instead of being forced into half-hearted, semi-permanent relationships. While such mergers would present major management challenges, at least the general direction of the company would be clear.
Back to the real world. Both a proper crossborder competition law and a facility to allow crossborder, intercontinental airline mergers are far ahead in the future. Meanwhile, one piece of advice is appropriate: get a good lawyer.
Source: Airline Business
