Antitrust Law Daily Wrap Up, TOP STORY: SkyTeam alliance members’ commitments ground EC’s competition concerns, (May 12, 2015)

By Greg Hammond, J.D.

The European Commission has approved final commitments made by SkyTeam alliance members Air France-KLM, Alitalia-Compagnia Aerea Italiana S.p.A., and Delta Air Lines, Inc., addressing the EC’s concerns that the airlines’ transatlantic cooperation could harm competition.

SkyTeam is an airline alliance, comprised of 20 airline members, that provides consumers comprehensive access to 1,052 destinations, increased flight frequency, and more connectivity. The alliance involves profit-sharing and the joint management of capacity, pricing, and schedules, among member airlines.

In 2009 and 2010, Air France, Alitalia, and Delta signed agreements that established a transatlantic joint venture. The EC investigated the joint venture, noting concerns that the cooperation—involving profit-sharing and the joint management of schedules, pricing, and capacity—might cause higher prices on the Paris-New York, Amsterdam-New York, and Rome-New York routes. In addition, the EC was concerned that competitors would be unable to challenge the joint venture’s ability to set and maintain anticompetitive prices due to considerable barriers to entry and expansion.

“Airlines can cooperate to enlarge their network if it makes them more efficient and allows them to better serve their passengers,” stated Commissioner in charge of competition policy, Margrethe Vestager. “With today’s decision I want to ensure that passengers flying from Paris, Amsterdam or Rome to New York continue to benefit from competitive prices and choice. We have now concluded our review of the three major worldwide airline alliances—and are one step closer to a genuine level playing field in transatlantic aviation markets.”

Under the final commitments, Air France, Alitalia, and Delta have agreed to:

• Make landing and take-off slots available at Amsterdam, Rome, and/or New York airports on the Amsterdam-New York and Rome-New York routes;

• Enter into “fair combinability agreements” that allow competitors to offer tickets on the airlines’ flights for the three routes;

• Execute “special prorate agreements” allowing access to the airlines’ connecting traffic on the three routes;

• Give access to the airlines’ frequent flyer programs on all three routes;

• Allow competitors’ passengers who have no equivalent frequent flyer program to accrue and redeem miles on the airlines’ programs; and

• Submit data regarding cooperation, which will facilitate an evaluation of the alliance’s impact on markets over time.

Companies: Air France-KLM; Alitalia-Compagnia Aerea Italiana S.p.A.; Delta Air Lines, Inc.

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