Commission set to vet high air fares

Date: 07/01/1999

By Chris Johnstone

THE European Commission is set to begin vetting airlines suspected of overcharging their passengers later this year, once officials have fine-tuned the procedures for identifying potential problems.

The institution decided last autumn to delay taking action for a few more months to ensure that its officials had a complete picture of the scale of normal fares across the EU and in all the market segments, from economy to business class, before launching a crack-down.

Although particular fares might seem steep at first sight, they may in some cases be explained by high local costs. “We want to have a systematic view across the Community,” said a Commission source.

Acute airline sensitivity about any accusation that they are overcharging passengers is behind the institution's cautious approach to the whole issue.

The Commission has the power to challenge overpriced air fares on its own initiative or wait for a complaint to spark an investigation, but officials working for Transport Commissioner Neil Kinnock want to be sure that they have a watertight case before targeting particular carriers.

They are moving into relatively uncharted waters, as there have been few prosecutions of airlines to date either for overcharging for tickets or undercharging in an attempt to drive rival airlines off lucrative routes.

Air carriers angrily deny that prices are too high for tickets on some European routes and snubbed the Commission when it began work on the new fare-vetting system.

Many airline analysts are expecting an imminent downturn in the aviation market, with a flight away from expensive business travel to cheaper fares. This could encourage airlines to try to boost profits by increasing prices on routes where passengers have few options to choose an alternative carrier.

Although the EU's liberalised airline market has been fully in place since April 1997, hopes of increased competition on existing routes and of new low-cost carriers coming on to the market to challenge incumbents have not been realised in some member states.

In the UK, and to a lesser extent the Netherlands, a number of low-cost rivals have emerged to take on the industry giants. But they have been notably absent in France and Germany. Lufthansa looked into the possibility of launching a cut-price airline, but eventually abandoned the idea.

Scandinavia has been identified by Competition Commissioner Karel van Miert as a particular black spot for high fares, with few companies emerging to challenge the dominance of Scandinavian Airline System (SAS).