Scrutiny of airline mergers gathers speed

Date: 02/10/1997

By Chris Johnstone

AN INITIAL European Com-mission verdict on the alliance between Lufthansa, SAS and United Airlines is set to be delivered by the middle of this month, in a move which should rebuff allegations that its scrutiny of a raft of transatlantic airline cases is taking too long.

The Lufthansa/SAS/United deal is unlikely to escape the Commission probe unscathed, with any conditions for clearance helping to deflect claims by British Airways that its partnership with American Airlines is the only one drawing fire.

Commission officials admit in private that the parallel investigation is being pushed ahead in part to answer BA/AA criticism.

BA boss Robert Ayling has attacked the Commission for grounding his airline's alliance while others are allowed to continue. Partnerships between Dutch carrier KLM and Northwest; between Swissair, Sabena, and Delta Airlines; and the Lufthansa, SAS, United alliance are already operational, even though they are still the subject of ongoing Commission investigations.

Tough negotiations on the BA/AA alliance are continuing, focusing on how many landing and take-off slots each must surrender at London's Heathrow and Gatwick airports.

BA/AA say Commission demands that they give up around 350 slots are excessive and could make the alliance “too costly” to continue.

The Lufthansa/SAS/United partnership is in a sense easier to handle than its BA/AA counterpart, since both Germany and Sweden have signed 'open skies' deals with the US and the Lufthansa/SAS partnership has already been screened by the Commission.

The BA/AA alliance is complicated by the fact that the US and UK are still haggling over a new bilateral aviation deal which will have a huge influence on the competitive environment in which the link-up is judged.

“In one sense our case is less political,” said an SAS official, who added that he nevertheless expected the Commission to give a final decision on the BA/AA partnership first.

Both Lufthansa and the German government have made much of the distinctions between the two alliances, drawing the broad conclusion that their deal does not face too much turbulence.

Lufthansa points out that its position at the hub airport of Frankfurt is very different to BA's dominance at London Heathrow. Frankfurt faces tough competition from other airports, with more than 50&percent; of Germans using or transferring to foreign airports for long-distance flights.

Whether Commission officials agree with Lufthansa's assertion that there are no real problems for new airlines in winning take-off and landing slots at Frankfurt remains to be seen.

However, even Lufthansa admits that all the regulatory aspects of its partnership with United have not been resolved.