Airlines unite to defend alliances

Date: 12/11/1998

By Chris Johnstone

AIRLINES are sinking their differences and joining forces in a bid to persuade the European Commission to relax the conditions for clearing transatlantic alliances.

The first display of industry solidarity is likely to come at a behind-closed-doors hearing next month on the conditions which the Commission attached to its provisional decision to approve the alliance between Lufthansa, Scandinavian Airline System (SAS) and United Airlines.

Lufthansa has asked for the hearing to voice its complaints about those requirements, and to try to rally EU governments and other airlines to its cause.

According to industry sources, airlines outside the partnership are lining up to tell the Commission that the conditions, especially the number of airport slots which must be surrendered and cuts in transatlantic services, are too severe.

In July, the Commission called on Lufthansa, SAS and United to give up some 108 airport slots and cede around one-third of their flights on two transatlantic routes between Frankfurt and Chicago and Washington.

Those airlines which are still waiting for the Commission to give its initial views on their partnerships - KLM and Northwest Airlines; Air France and its separate deals with Delta and Continental Airlines; and Swissair, Austrian, Sabena and Delta - have everything to gain from persuading the Commission to relax the demands it has made of their rivals.

They would expect to benefit in turn as the Commission seeks to apply a set of uniform rules to its decisions on all the alliances.

Most of continental Europe's airlines have been careful not to criticise other deals apart from the tie-up between British Airways and American Airlines, which they see as a case apart.

Lufthansa and its alliance partners hope that the hearing will help persuade the Commission to soften its stance when it decides early next year whether the July conditions should be altered. Initial decisions on the other transatlantic partnerships should be delivered before then.

"At the moment, the scenario we are looking at would have the Commission giving final verdicts on all the alliances at once," said one airline executive.

Lufthansa and the Commission are still at loggerheads over the specific demand for the airline to drop its current code-share partnership with Austria's Lauda Air on the transatlantic route between Munich and Miami. Lauda is involved in a separate alliance with Austrian Airlines and the institution has expressed concern about this overlap of loyalties.

Ironically, perhaps, the Commission also has to make a decision on Air France's simultaneous transatlantic partnerships with two rival US airlines: Delta and Continental.

Officials are also likely to be asked to start investigating the partnership between KLM and Italy's Alitalia by the end of the month. The Dutch airline is still considering whether to turn this European partnership into a transatlantic alliance involving Northwest Airlines. "We have not decided about that yet. We will deal with first things first and seek clearance for the European partnership, and then go from there," said a KLM spokesman.