Air France clearly enjoys sailing close to the wind. But this time it may have capsized the boat, following SAS' complaint to the European Commission that the French flag's recent weekend break promotions undercut market prices.
The French flag carrier is strictly prohibited from price leading under the conditions the Commission set on Air France's state aid approval in 1994. SAS claims Air France's offers, which include round trips from some eight European countries to Paris, two nights hotel accommodation, and ground transportation, were clear examples of price leadership.
Air France says the deal it has with various tour operators around Europe means it is not undercutting competitors, as it is the operators who are offering the low prices. On Stockholm-Paris, Air France's rate is SKr2,200 ($323), which SAS' information director Peter Forssman estimates is some SKr500 below what it should be.
The Commission is investigating the complaint, but a Brussels lawyer points out the case could rest on whether it is the air fare alone or the package as a whole that the market leader principle applies to.
* SAS has reorganised its ownership structure in a step that could eventually lead to a single, privatised company. Its three parent companies, Swedish group Sila, Denmark's DDL and Norway's DNL, will remove all companies other than SAS from their holding portfolios. This will link the carrier's performance directly with that of its parents' shares and should help improve SAS' access to capital markets.
Sara Guild
Source: Airline Business
