BA/KLM talks spark competition fears

Date: 06/07/2000

By Renée Cordes

KLM ROYAL Dutch Airlines and British Airways would have to make significant concessions to get their planned alliance cleared for take-off by EU competition regulators, according to industry experts.

Just two months after abandoning a partnership with Italian national carrier Alitalia, KLM announced last month that it had begun talks with BA. This has raised concern among some rivals, especially UK low-cost carriers easyJet and Richard Branson's Virgin Express, about unfair competition on London-Amsterdam flights.

"There are lots of things standing in the way of achieving a tie-up," said one London-based analyst. "They would have a fairly sizeable share of traffic within Europe as a whole."

BA spokesman Nick Claydon said the UK airline was talking to KLM as it searches for ways to boost its presence in Europe. "Europe is our top priority.

We need to get our European operations in order," he said, adding that there were numerous opportunities to improve both efficiency and make major cost savings.

He said KLM already had a strong presence in the UK which, combined with BA's own extensive network, could offer passengers a wider choice of destination. But there is mounting speculation that the airlines may be forced to sell their "low-cost" spin-offs, dashing BA's hopes of making greater inroads into the discount travel market through KLM's Buzz.

The two airlines discussed the possible tie-up with Competition Commissioner Mario Monti late last week, but stressed afterwards that the meeting was simply an informal session to brief the EU executive on the state of play in their discussions.

The talks come as the industry continues to consolidate worldwide and as European Commission regulators struggle to find the right formula for scrutinising mergers. Until now, watchdogs have mainly looked at direct flight overlaps but they are coming under increasing pressure from industry to look at the overall market and the benefits to passengers of expanded networks offered by such deals.

A Commission spokesman said it was unlikely that regulators would deliver verdicts before summer on a string of transatlantic airline alliances which have been waiting for approval for more than a year. This is partly a result of the fact that the partners within specific alliances keep changing, but also stems from the regulators" efforts to get as much information as possible from carriers about the nature of their tie-ups.

Despite the delays, the industry is not yet putting real pressure on the Commission to deliver verdicts on the outstanding cases. "It is understandable that they are careful and taking their time on these," said a spokesman for a one large carrier which is waiting for a decision from the EU executive.