Airlines snub bid to cut excess fares

Date: 27/02/1997

By Chris Johnstone

THE EU's main airline industry lobby has vowed to snub European Commission attempts to clamp down on excessive fares by refusing to provide essential details of carriers' costs and prices.

The Association of European Airlines (AEA) spelled out its policy of non-cooperation to consultants who approached it for help in compiling a database to enable the Commission to assess whether airlines are charging inflated prices.

“It has been made obvious the facts will be used against airlines. We made our policy clear to them and I do not think it will change in the short term,” said a spokesman for the Brussels-based AEA.

The association represents Europe's biggest airlines - with members including British Airways, Lufthansa, Air France, Alitalia, SAS and Iberia - and its refusal to cooperate marks a sharp cooling in the industry's relations with the Commission. In the past, member airlines have agreed to release confidential figures to transport experts examining the health of the EU industry.

Commission officials say the AEA's refusal to cooperate will make its clamp-down “tricky” - but not impossible. “We have been careful to choose consultants who are in a position to know what the costs are without airline cooperation,” said one.

The Commission's Directorate-General for transport (DGVII) needs this information in order to make use of hitherto dormant powers to curb overcharging by airlines.

Officials have made no secret of the fact that these could be used to target the scheduled airlines' main money-spinner: expensive but flexible business fares. A Commission survey last year showed that such fares have remained stubbornly high - and some have even risen - since European airline liberalisation began four years ago, in sharp contrast to the downward trend in economy tariffs for weekend returns and leisure flights.

“We are not looking to target individual airlines but rather high overall business fares. With liberalisation, fully flexible fares have remained almost unchanged,” said an official.

Preparations for the Commission's attack on inflated fares will take off next month when consultants are officially appointed to begin work on the database.

This should be ready by September, enabling the Commission to determine where and when passengers are being overcharged at the touch of a button. If transport officials discover this is happening, they will be able to threaten the use of powers granted by a 1993 regulation to force cuts. Under these rules, ticket prices amounting to 130&percent; of the airline's costs are defined as excessive.

The regulation has never been used, partly because of a lack of complaints from passengers and of information on which to proceed. Shortly before it came into force, however, the Commission used earlier powers to demand a swathe of price cuts from Europe's biggest carriers. Most airlines said at the time that the Commission had taken so long to rule on the fares that they no longer applied and thus would not be changed.

The AEA says liberalisation was supposed to give airlines the freedom to set their own fares and it is ironic that the Commission now appears to want to turn the clock back to the days of regulation. “It should be left to the market to decide prices,” said a spokesman.

He added that the Commission had contributed to high costs by failing to do enough to attack airport monopolies and introduce more competition for services used by airlines.