Lois Jones/BRUSSELS
European Union competition commissioner Karel Van Miert is a man of many contradictions. One leaps out at you from the moment you meet him: his loud, lurid ties offset his traditional sober suit, which blends in with the many others lining the corridors of the European Commission in Brussels.
When he speaks, the vigour and vibrancy of his voice contrast sharply with his relatively small physical stature.
In his office further contradictions abound. Framed pictures of people clad in traditional Flemish costume sit next to the large EU flag which dominates his desk area. The expression of a little known principality on the one hand and a powerful symbol of European cooperation on the other illustrate an important dichotomy in Van Miert's personality. The commissioner is said to be intensely proud of his humble, Flemish roots yet speaks out vigorously against those who focus on national interests instead of furthering European Union goals. High on Van Miert's black list are those governments which have pursued individual open skies agreements with the US, which he claims hinder the implementation of a European multilateral agreement. Anything less backtracks on the concept of a single European market, Van Miert claims.
However Van Miert's favouring of a multilateral approach seems to be falling on deaf ears. Van Miert's critics claim that, against his own intentions, he is helping to build a fortress Europe and dismantling progressive competitive moves by European airline alliances. 'The European flag doesn't exist for the rest of the world. There's no political union. You can't blame individual countries for forming open skies deals, and pursuing their own national interests instead of waiting around,' says one Brussels insider.
Another of Van Miert's contradictions lies in his policies. Despite his socialist background, Van Miert has been as 'conservative as a child of Mrs Thatcher' during his term in office, says a leading Brussels lawyer.
This man of contradictions is certainly a hero to his people. Van Miert is said to be supportive of his staff and good at managing his own constituency. Yet it is no secret that Van Miert has caused annoyance with his scrutiny of existing transatlantic alliances and the interminably delayed decision on the proposed British Airways/American Airlines link-up. After nearly two years of scrutiny, the BA/AA alliance is now the Loch Ness monster of the airline industry - huge, much talked about and hyped but yet to be actually seen.
Yet the plethora of dossiers, neatly lined up in mounting piles on Van Miert's desk, serve in part as a justifiable excuse. Van Miert is a busy man - any proposal for a merged company with a worldwide turnover of more than Ecu5 billion (US$5.1 billion) comes his way.
Van Miert has already made his mark as competition commissioner via one notable ruling. The industry is still applauding his performance last summer when he wrung concessions from Boeing for its merger with McDonnell Douglas. Now, the same industry awaits with bated breath to see what concessions Van Miert means to extract for BA/AA to go ahead and whether the existing transatlantic alliances also under his scrutiny will escape more lightly. The conditions are almost certain to match the determination of this commissioner to ensure fair competition in the game of global alliances. A game that he must soon allow to begin.
Airline Business: When can we expect a decision on the planned British Airways/American Airlines alliance?
Karel Van Miert: Well, probably in April when we will publicise our position in detail on the different points that have been under discussion.
AB: What sorts of conditions are you examining for BA/AA and the other transatlanatic alliances?
Van Miert: Well, there's slots and there are also frequencies on routes; frequent flyer programmes; the relationship with travel agents; computer reservation systems; links to other carriers, and relationships with feeder carriers.
AB: Will the BA/AA decision coincide with decisions on other transatlantic alliances?
Van Miert: The problem is that we're still trying to gather information on the other transatlantic alliances and it's taking longer than expected. Also, there was a period when some companies were not that willing to cooperate. Now that's changed, but we still have to check and gather some of the data. The transatlantic alliances are being handled in the same way as the AA/BA case, so the outcome of our inquiry will be coherent.
AB: Does BA/AA raise very different issues to those raised by say, the Star Alliance, which keeps informally adding partners? What are they?
Van Miert: Star will be looked into in due time as well. But with Star, we're not talking about the same intensity. The [purely] transatlantic alliances are near mergers, not just codesharing.
AB: Why are the other transatlantic alliances being allowed to continue growing when AA/BA hasn't even been permitted to start?
Van Miert: The answer is very simple - we haven't given our antitrust immunity to any of these alliances. The Americans did so in many of these cases but linked this to open skies. As the alliances haven't been given antitrust immunity then we will start procedures against them and insist that they are brought in line with our competition rules. If they don't comply then they will be fined. That's the situation.
The US authorities have been using antitrust immunity to force open skies agreements with EU members. This is a major discrimination which absolutely flies in the face of one of the basic principles of community law and the idea of a common aviation policy. It does not allow, for example, Deutsche BA to take advantage of the open skies agreement between Germany and the US or Lufthansa to take advantage of open skies between the Netherlands or Belgium and the US. So it really introduces an unacceptable discrimination.
AB: Why do you think that EU transport ministers are at loggerheads with the Commission over your attempts to negotiate open skies agreements with the US?
Van Miert: Because all the ministers are trying to negotiate to the advantage of their own country and to the detriment of other European carriers - that's the reality. If you put all these pieces together, what do you see? Basically, that this is all to the advantage of US carriers and is a kind of renationalisation of aviation policy. And even with privatised carriers, governments are still behaving as if they are still the owners. They're carving up their own market, absolutely contrary to one of the most basic principles of the common market. With individual open skies agreements, governments are in fact backtracking or even denying the logic of the common market. It's unlawful and translates into an unbalanced situation.
AB :Are you going to apply again for the right to apply EU competition laws to third-country routes?
Van Miert: We do have the right to do so under Article 89, but what is lacking are specific procedural instruments. That means that such cases have to be dealt with by the national authorities, by us and by the US authorities, which adds up to very complicated procedures.
AB: What about the claim that the Commission's position on bilaterals and its opposition to airline alliances threatens to weaken the global competitiveness of European alliances?
Van Miert: Well as a matter of fact, individual member states are giving into US pressure to develop this type of bilateral alliance which clearly favours US carriers. We can only talk on an equal basis to the US if we talk as the EU as a whole, and not as individual countries protecting national carriers.
AB: Do major alliances like Star, KLM/Northwest, Delta/Swissair or AA/BA need EU antitrust exemptions in order to split revenues and agree fares, as well as US antitrust immunity?
Van Miert: US antitrust immunity is tied to open skies, it's not just about competition law. The US uses competition law to get open skies obviously to the advantage of US carriers. It's a combination of open skies policies, and bilaterals.
AB: What legal tools can the Commission use in this area?
Van Miert: If member states continue to use this bilateral [process] to achieve open skies, it's clearly against the basic principle of Community law. We can use procedures in specific cases before court to clarify that. But in the meantime it doesn't prevent the Commission from doing its job as a competition authority.
AB: Do the national authorities tend to have similar views to DG-IV?
Van Miert: Some of them do hold similar views to DG-IV, yes. However, the general tendency is for national authorities to protect their national flag carriers.
AB: Is a global set of competition rules a desirable objective for the long term? Will you push for this?
Van Miert: We should be able to treat global cases as such but this is a far off goal. For the time being we would just like a more adequate instrument to deal with cases.
AB: What about the idea recently raised by German ministers of a working party being formed to deal with aviation competition issues?
Van Miert: Sorry, but this is part and parcel of competition policy and is the competence of the Commission. We're working with national competition authorities - in Germany for instance with the Bundeskartelamt - and we have similar if not identical positions on the Lufthansa and United case.
AB: Are you pushing to have ownership restrictions between the US and EU relaxed? How?
Van Miert: This is a more general problem. Individual member states are giving in to US pressure for bilateral deals. The US is pursuing a very protectionist policy.
AB: Do you accept the argument that effective network competition will take place between alliances rather than between individual carriers? If not, why not?
Van Miert: In fact, when carriers talk about competition between networks, they're actually talking about carving up the market. That's what they're really talking about. They then try to avoid real competition instances - why shouldn't it be possible for Lufthansa, for example, eventually to take advantage of open skies and fly between London and the US? It's only because of bilateral agreements.
It's very striking when some of the carriers come to see us as delegations, declaring that the Commission should just ensure adequate competition between networks. Then at the same time one carrier will complain against the other, claiming that the carrier is trying to oust them from the market. Or major carriers will sometimes try to kill smaller carriers on individual routes by all of a sudden substantially lowering their fares.
AB: Is codesharing in the consumers' best interest?
Van Miert: The consumer should be told what codesharing is all about. A passenger can buy a ticket with a given company and then discover at the airport that he or she is flying with another carrier. The passenger should be told what's going on - a codesharing flight should be introduced as such.
Codesharing is leading to a situation whereby even the biggest carriers will be out of business at given hubs. Where's the competition in Brussels if you're flying to New York, for example? It's gone, now that CityBird is cooperating with Sabena. And there are many other similar instances. Codesharing is more about carving up the market than about competition.
AB: What are your chief concerns regarding slots?
Van Miert: Slot trading is not allowed. On top of that, if you have competition concerns, certainly at congested airports, then in order that competition can still happen and new entrants can have a chance, we need to make sure that slots will be available. At a non-congested airport this is not a problem, but if it is a congested airport you need absolutely to guarantee that interesting slots will be made available. If they are not available any more, then slots should be given up by those enjoying an alliance because otherwise it makes competition problems even worse.
AB: What measures do you believe the Commission should take to ensure startups have access to slots at busy airports?
Van Miert: Well it's not our business to allocate slots; that's up to the authorities at the airport. For startups to compete with major airlines and take them on, then the airport authorities need to give interesting slots.
In general, the slots issue is strengthening the big carriers to the detriment of the smaller ones. From the point of competition, slots need to be made available the day a competitor comes in and asks for them. If no-one is prepared to compete and offer slots, then it's a different story.
AB: Why do you oppose buying and selling airport slots?
Van Miert: Well for a start, the slots have been given for free in the first instance. Only in the UKwill you tend to find people in favour of slot selling. Basically, slot selling favours the big companies to the detriment of smaller ones, and usually the smaller ones are the ones which enable competition to continue. During our scrutiny of the BA/AA and other transatlantic alliances, there cannot be any doubt that slots should be given up.
AB: Are you going to punish those which indulge in under the counter slot selling?
Van Miert: Well if there's a complaint and evidence can be found, then eventually they can be taken on under the slot allocation regulations.
AB: If BA/AA are forced to give up slots at London/ Heathrow how should these be fairly reallocated?
Van Miert: That's up to the slot allocation authorities to make sure that what has been agreed should be properly adhered to. And remember BA/AA is not just about slots, it's about the premises that should be made available and other conditions.
AB: The US is taking a very tough stance towards predatory behaviour by larger carriers, recently publishing guidelines. How do you reply to the arguments that the EU should be tracking predatory behaviour more carefully and showing that it can take rapid action when needed?
Van Miert: It is a real problem but a very difficult problem to tackle. But if there is a good case then we eventually will rule on it. We nearly did so with EasyJet's predatory pricing complaint against KLM but in the end, EasyJet withdrew the complaint before a ruling was made.
AB: Yes, but that case took over a year.
Van Miert: Yes, well the procedures are what they are. It's a real problem. We're looking with great interest at what the US is doing.
AB: Are there any outstanding predatory pricing complaints with the Commission at the moment?
Van Miert: No, there aren't.
AB: How do you monitor the use of predatory tools such as pricing, scheduling, capacity dumping, frequent flyer programmes and travel agency commissions?
Van Miert: It's true that it's not easy and it all takes time and you have to find the evidence for the use of these predatory tools. There's also the problem of the Commission being asked to tackle promotional activity, which turns out to be perfectly legitimate.
AB: When major airlines set up low-cost operations, do the low-cost startup carriers need special protection? Or is existing legislation sufficient?
Van Miert: We can't say to the airline, 'look you're not allowed to set up low-cost carriers'. But if the low-cost carrier is being subsidised by the major airline then it's not really a low-cost carrier and is more a kind of predatory tool.
But in principle, why should we be against low-cost subsidiaries as they bring more competition to the marketplace?
AB: Are you satisfied with the results of European airline liberalisation so far?
Van Miert: It's taken us a long time to get as far as we have and we're not yet as far with liberalisation as we would like to see it go. There's too many routes in Europe without competition and with very high fares. It would be an exaggeration to say that we are completely satisfied with the results of liberalisation so far.
Source: Airline Business
