New airline slots formula eases merger case backlog

Date: 22/01/1998

By Chris Johnstone

A NEW formula for working out how many take-off and landing slots airlines must surrender at key airports to win approval for their alliances is paving the way for a backlog of competition cases to be cleared.

The procedure worked out by the European Commission, in close cooperation with powerful national competition authorities such as the German cartel office and the UK Office of Fair Trading, will be applied to all outstanding airline alliances.

"This method has been developed. Now we are in the new phase of discussing the results," said Competition Commissioner Karel van Miert this week.

Details of the formula remain a closely guarded secret, but Commission officials hope that its application across the board will help prevent accusations of preferential treatment being directed at the institution.

News of the procedure emerged as Van Miert was accused this week of relegating Europe's biggest airlines to the second division of world-wide carriers by delaying decisions on transatlantic alliances, favouring newcomer airlines and over-regulating the allocation of spare airport slots.

The attack was led by Jürgen Weber, chairman of Lufthansa and acting president of the Association of European Airlines.

Van Miert dismissed the criticism as unfounded, claiming that Europe's airlines liked publicly to blame the Commission for their problems but in private were keen to point the finger at each other.

The new methodology has already been accepted as the basis for negotiations with British Airways (BA) and American Airlines (AA), the partners in the most problematic alliance facing the Commission because of its size and scale.

The Commission has also yet to pronounce on partnerships between Lufthansa and United Airlines; Swissair, Sabena and Delta Airlines; KLM and Northwest; and Air France's twin partnerships with Continental Airlines and Delta Airlines.

The formula has raised the prospect that the Commission could give a favourable initial opinion on the BA/AA alliance next month, with a final verdict a few months later.

Clearance by May would allow the two to make changes to their timetables in time for the 1998 winter season.

An 18-month stand off, punctuated by acrimonious accusations, preceded the apparent breakthrough in talks between the Commission and BA/AA this week.

"Things are moving in the right direction. For the first time, I think we will get this sorted out," Van Miert said after his meeting with BA's chief executive Robert Ayling.

The Commissioner hinted that he was relaxing his initial demand that BA and AA surrender up to 350 take-off and landing slots a week at London's congested Heathrow airport.

"That figure was always a maximum," Van Miert told European Voice.

Industry sources suggest the Commission's demand for freed slots has been slimmed down to between 250 and 300 a week. The UK Office of Fair Trading originally called for BA and AA to give up only 168 slots a week.

Other questions surrounding the issue are still unclear, such as whether airlines should be allowed to sell some of their slots and how those which are given up should be redistributed.

British Midland, one of BA's main rivals in the domestic and European arena, this week called for any slots which became available to be shared out between European services, arguing that transatlantic routes were already near saturation. Chairman Michael Bishop said that adding extra services would result in "a fare blood bath".