Bonn rebuffs Commission bid to boost its role in air mergers

Date: 10/12/1998

By Chris Johnstone

GERMANY is set to give the cold shoulder to the European Commission's bid for stronger powers to vet international airline alliances during its term as the EU's agenda-setter.

Although Bonn is still finalising its priorities for the transport sector during its six-month EU presidency, it is already clear that the Commission's proposal to give itself increased powers will be firmly sidelined. "It is not a first priority or even a second, but might provisionally be a third priority if we are looking for dossiers," said one diplomat.

Germany's stance is hardly surprising following its harsh criticism of the Commission last year when the institution proposed what Bonn regarded as unfairly harsh conditions on Lufthansa's transatlantic partnership with United Airlines.

For the past 35 years, the Commission has had full powers to police tie-ups between airlines within the EU, but has had to share responsibility with national governments for deals which go beyond the Union's borders.

The Commission launched a fresh bid last May to win sole authority to clamp down on cartels and anti-competitive practices in airline deals between the EU and the rest of the world.

The proposal would also give it fresh powers to negotiate changes to aviation agreements between Union and non-EU countries if these posed competition problems. This could pave the way for the Commission to press for wholesale changes to current two-way aviation deals.

The Commission claims many of these agreements, and especially the 'open skies' deals signed by several EU countries with the US, divide the European market into national segments and discriminate against rival airlines keen to launch international services from other European countries.

However, EU governments have in the past fiercely resisted Commission attempts to become involved in such agreements, arguing that they can get better results on their own.

The potential confusion and long-winded procedures resulting from the current division of powers were less of a problem in the past when airlines' freedom to strike deals was limited by bilateral arrangements between governments.

But the potential flaws in the system have been exposed by today's more liberal environment. The Commission has been blamed for the slow treatment of the British Airways/American Airlines and Lufthansa/SAS/United alliances, adding extra weight to its calls for change. In these cases, both the Commission and the national competition authorities in Germany and the UK have examined the alliances.

Although the institution claims in public that it has the last word on the conditions which alliance partners must meet, officials admit in private that parallel procedures create the risk of legal conflicts and confusion.

Such problems have only been avoided so far because the Commission and national authorities have chosen to cooperate with each other rather than challenge each other's role in the process.