EasyJet eyes frequent flyer deals

Date: 18/09/1997

By Chris Johnstone

CUT-price airline easyJet is threatening to challenge its competitors' frequent flyer schemes after the European Commission has ruled on its unfair competition complaint against Dutch carrier KLM.

EasyJet says it has in its sights the system which allows - mostly big - airlines to offer free flights to heavy spending travellers by, for example, giving them air miles.

But it adds that no decision on filing a complaint with the Commission will be made before the KLM case has advanced further.

The Dutch airline will try next week to quash damaging allegations that it used sharp practice in a bid to end competition from rival easyJet, when both sides put their arguments to competition officials at a hearing on Monday (22 September).

“We will take things one at a time,” said a spokesman for easyJet, who added that the company's lawyers had told it that there were grounds to challenge frequent flyer programmes. He confirmed that British Airways would be amongst the highest profile candidates for a complaint if one were to be launched, but said that ultimately it would be up to easyJet boss, Stelios Haji-Ioannou, to decide which airline to target.

Doubts about the damage frequent flyer programmes may do to competition have been raised in private by top officials in the Commission's Directorate-General for transport (DGVII), but the Directorate-General for competition (DGIV) has been lukewarm about taking action. One fear is that firms or employees might be tempted to stick with an airline because of the perks, even if cheaper deals were offered elsewhere.

The ethical question of employees claiming free trips which have been 'earned' with company travel has also been raised, with some Scandinavian firms even threatening to stop their staff from flying with some airlines that have frequent flyer schemes.

In the current easyJet competition case against KLM, the UK-based carrier alleges KLM matched its fares on flights between Amsterdam and London with the clear intention of forcing it to abandon the new cut-price service after it made its debut on the route.

KLM admits that it cut its lowest single fare to 45 ecu, the same as easyJet's, but says this was purely a response to market conditions.

However, the Commission appears to believe that KLM has a case to answer and has sent the airline a formal statement of objections over the 'predatory pricing' claims.

An industry source said one clear option in the statement of objections was for KLM to withdraw the cut-price fares which are being offered on a limited number of seats immediately. KLM confirmed the letter had been received, but said it had nothing to add.

A finding of predatory pricing against KLM would be a landmark decision in such airline competition cases, which have been notoriously difficult to prove in the past.

Fast-track procedures enabling the Commission to ban airlines using 'dumped' tickets to destroy competition have existed for around five years, supplementing its existing competition powers. However, so far there have been no successful cases of predatory pricing brought against airlines.