Van Miert sets tough conditions for air alliances

Date: 21/05/1998

By Chris Johnstone

EUROPEAN regulators will insist that British Airways and American Airlines shed between 270 and 300 weekly take-off and landing 'slots' at London's Heathrow airport in return for approving their controversial alliance, say official and industry sources.

The European Commission has called on the two carriers to make slots available at the world's fourth-largest airport for at least 19 daily transatlantic round-trips by their rivals, a significant retreat from the 25 originally sought by Competition Commissioner Karel van Miert.

Van Miert will also call on Germany's Lufthansa and United Airlines, which are part of the eight-airline Star Alliance with combined sales of more than 50 billion ecu, to free up 100 slots in Germany, most of them at the highly congested Frankfurt airport.

Lufthansa, which alone accounts for 50% of all traffic at Frankfurt, has already warned that it will challenge such a decision in court. It firmly believes its transatlantic alliance to be less damaging to competition than the far-reaching BA/AA deal.

Finding competitors to take up the resulting slack on transatlantic routes will be far from easy, according to Roland Weil, Delta Airlines' head of sales for Germany. "US carriers are already present in the 'departure complexes', the times when they can leave in waves and get the best connections for long-haul carriers," he said.

In both cases, the Commission will demand that preference in allocating the new slots be given to airlines which can boost transatlantic competition, on condition that they prove they can offer sufficiently frequent services.

Unused slots would be placed in the airport's pool and used for services on alternative routes if transatlantic competitors failed to materialise.

In addition, the Commission will aim to tighten up the rules to prevent alliance partners from abusing their power to market their services and offer conveniently timed and frequent flights.

Options include forcing them to open up their 'frequent flyer' programmes to other airlines or banning the use of such incentives on routes where they have a dominant position.

The Commission will also propose general rules aimed at preventing the abuse of travel agents' incentives, like the scheme which provoked Virgin Atlantic into recent court action against BA.

A freeze, or in some cases a reduction in the number of flights on key routes operated by BA/AA, such as London-Dallas Fort Worth and London-Boston, will be demanded to help new airlines get a foothold.

Sources say these capacity restrictions, aimed at "presenting a window of opportunity" to competitors, would last for less than a year and would only be sparked if other airlines launched new services on these routes.

Commission officials say the institution has learnt the lesson of its handling of the alliance between Lufthansa and Scandinavian Airlines System (SAS), which was cleared three years ago.

Although the Commission demanded that both airlines make slots available at Copenhagen, Stockholm and Frankfurt and ordered SAS to leave a marketing alliance with Austrian Airlines and Swissair, it failed to ensure that they cut their services on flights to and from major airports. As a result, competitors did not appear.

BA has 40% of all weekly slots at Heathrow and AA will bring another 182 to the alliance. US carriers Continental, Delta, TWA and USAir all want access to the largest airport outside the US to boost their presence in Europe and the Middle East.

Van Miert had planned to give his verdict on the measures proposed by the airlines to meet his concerns next week, but this has been pushed back to early June.