BA chief vents his anger at Commission

Date: 07/10/1999

By Renée Cordes

WHEN the European Commission fined British Airways €6.8 million this summer over its controversial incentive scheme for travel agents, it warned that it would scrutinise the same kinds of practices by other carriers.

"All similar situations will have to face similar consequences," former Competition Commissioner Van Miert said then, without pointing to any specific companies. "Probably the airlines will adapt their systems, but these cases normally have to be followed up."

British Airways chief executive Robert Ayling is impatiently waiting for new Competition Commissioner Mario Monti to fulfil that pledge. "Mr Van Miert went out of his way to make an example of BA," he claims, still clearly smarting from the decision. "The problem is that nobody else has followed the example. They have ignored it, and we cannot have that. We need to see action."

Following an investigation into complaints by rival Virgin Atlantic Airways, the Commission ruled that BA's system for paying commission to travel agents unfairly restricted sales by other firms. The institution claimed that for at least seven years, BA had offered travel agents extra payments in return for increasing their sales of BA tickets. The airline discontinued the scheme early this year.

British Airways responded angrily, describing the Commission's decision as "wrong in fact and in law." The company has filed a complaint with the European Court of First Instance asking for the decision to be suspended, and has sent letters to some of its rivals warning them to halt similar schemes. BA officials have not ruled out taking competitors to court at a later stage.

"The rules should apply to everybody," insists Ayling. "At the moment there is a differential state of affairs and I have not met anyone who does not think that is a little odd."

While there is not much BA can do but wait for the Court's decision and follow-up action by Monti to carry out his predecessor's threat, Ayling did not waste any time in bringing a list of other demands to new Transport Commissioner Loyola de Palacio.

At a meeting with De Palacio in Brussels just a few days after she took office, Ayling and his aides argued their case for bolstering the aviation industry as a key component of a single EU transport market.

"The European industry is still quite fragmented as compared with the United States," says the BA boss. "We need a very strong, efficient, competitive aviation industry based in Europe."

Among the industry's greatest headaches is the fact that costs are rising even though prices are falling in several other sectors, says Ayling, pointing to airports which charge inflated landing and take-off fees as a major problem.

BA and other airlines have repeatedly complained that they are overcharged by airports and are not always able to recover the additional expense from passengers unwilling to pay higher prices for their tickets.

During his visit to Brussels, Ayling insisted that he would "encourage" the new Commission to expend a "considerable part" of its energy ensuring that the monopoly pricing structure of airports and air traffic control systems was radically changed.

The Commission has now launched investigations into airport charging structures in all 15 member states. In February, it ordered Portugal and Finland to revise their landing charges, on the grounds that they unfairly discriminated against foreign carriers, or face fines. Competition officials ruled that there was "no objective justification" for discounts of 50% and 60% for domestic flights at Portuguese and Finnish airports respectively.

However, proposals drawn up by the Commission for new EU legislation to ensure that airport charges are related to actual costs ran into fierce opposition from Sweden and Spain, angered by clauses which would have prevented funds which were raised by charges levied at their main airports from being used to subsidise outlying regional terminals.

As Ayling continues his battle for a 'fairer deal' from airports, he is also watching closely to see how the escalating trend towards alliances between the world's major air carriers develops.

But he says that he is unconcerned by recent changes in the aircraft engine sector, which is increasingly dominated by a small number of big players.

He insists that, despite speculation to the contrary, BA was untroubled by Boeing Co.'s decision earlier this year to award General Electric exclusive rights to develop a new engine to power longer-range versions of its 777 jetliners. "What we need to ensure is that the small number of companies remain competitive," he says.