Van Miert may be forced to probe code-share deals

Date: 29/10/1998

By Chris Johnstone

A SMALL Danish regional airline is threatening to force the European Commission to widen its scrutiny of airline partnerships by opposing a tie-up which, it claims, will boost Scandinavian Airlines System's (SAS) dominance of the Nordic market.

Sun Air is expected to announce by the end of this week whether it will launch a complaint with the Commission's Directorate-General for competition (DGIV) against Danish airline Maersk Air's code-share deal with SAS.

Code-share agreements blur the difference between airlines, boosting the marketing muscle of partners by combining their bonus schemes for travellers. They have become a common feature of the aviation scene in the 1990s despite warnings from the Commission's transport officials that they could blunt competition between airlines.

While their competition colleagues have launched lengthy investigations into full-blown airline alliances, they have until now downplayed the potential damage of code-share deals and avoided examining them.

Transport officials, under Commissioner Neil Kinnock, believe there is a clear case for a Commission investigation into the Maersk agreement, with some arguing that it is one of the most blatantly anti-competitive and questionable code-share deals so far. "If ever there was a case for a Commission investigation, this is it," said one.

Their hopes that competition officials will bow to calls for a probe this time have been boosted by the fact that the Maersk deal is taking place in a market which Competition Commissioner Karel van Miert himself has held up as an example of where liberalisation and market-opening measures have failed to produce results.

Before the summer break, Van Miert took aim at airline giants SAS and Germany's Lufthansa, asking why no new carriers had entered the market and launched new services after the Commission forced the airlines to release airport slots as the price for their alliance.

Sun Air, which has British Airways as a franchise partner, says Maersk Air's code-share agreement ties up the lucrative airline market between Oslo, Stockholm and Copenhagen: the so-called Golden Triangle. "Competition will not exist any more after this," said one airline spokesman. "It would be suicide to try and compete with Maersk and SAS on their routes."

Sun Air claims it is taking the moral high ground on the code-share issue and has little to lose directly from Maersk's tie-up.

It objects to a trend in EU aviation policy which, it claims, appears to turn a blind eye to the creation and strengthening of local dominant positions as long as there is overall competition between alliances.

A company spokesman said the US authorities had made the same mistake by refusing to intervene and regulate parts of the market after liberalisation, and were now waking up to fact that the major airlines were the only ones left.

Sun Air's routes are mostly regional, from Århus and Billund to other parts of Scandinavia, and the airline suggests that Maersk's code share might actually benefit it by encouraging its rival to withdraw from some smaller routes.