IP/04/469
Brussels, 07 April 2004
Commission approves alliance between Air France
and Alitalia
The European Commission has cleared an alliance between Air France and
Alitalia after the companies agreed to surrender a sufficient number of take
off and landing slots at airports to restore competition between France and
Italy.
“Consolidation of the European airline sector is a long-due necessity. It is in the
interest of the airlines themselves, their employees and customers as it ensures the
companies’ survival and continuity of services in an increasingly open economy,”
said Competition Commissioner Mario Monti. “Today’s decision ensures that
travellers between France and Italy will continue to have choice of services and will
enjoy competition on prices. It also shows, once more, that the European
competition rules do not stand in the way of consolidation, provided that the
competition concerns, when they exist, are addressed in a satisfactory way”.
Air France and Alitalia in 2001 entered into a co-operation agreement aimed at
creating a European multi-hub system based on their main airports of Paris Charles
de Gaulle (CDG), Rome Fiumicino and Milan Malpensa around which they
interconnect their world-wide networks.
The agreements were notified to the Commission in November 20011 for an
exemption under the European competition rules as applied to the aviation sector
(Regulation 3975/87).
In July 2002, the Commission reached the preliminary conclusion that although the
two companies’ networks were highly complementary -- Air France is more present
than Alitalia on routes between Europe and North America, the Far East, and SubSaharan Africa, while Alitalia is more focused on Southern Europe and on the routes
between Europe and North Africa, the Middle East, and Latin America – their
strategic alliance raised serious competition problems between France and Italy.
The Commission identified seven routes where the combination of the forces of Air
France and Alitalia would eliminate or significantly reduce competition. These are
Paris-Milan, Paris-Rome, Paris-Venice, Paris-Florence, Paris-Bologna, Paris-Naples
and Milan-Lyon, where prior to the alliance, Air France and Alitalia were the two main
competitors.
More slots for competitors
1
Unlike in the merger area, there is no legal timetable for reviewing air alliances. The
duration of the investigation depends largely on whether the Commission identifies
competition problems or not and on the willingness and speed with which the companies
address those problems. But contrary to a merger, the companies have no obligation to
wait for the Commission’s green light before starting the alliance.
After lengthy discussions, the two airlines have agreed to surrender up to 42 pairs of
slots (i.e. 84 single take-off or landing slots) per day, of which 19 pairs at the Paris
airports of CDG and Orly.
This creates the conditions for a total of up to 21 return flights2 a day on the affected
routes. The Commission seeks to safeguard the following number of competing
services:
- Up to six daily return flights between Paris and Milan in case the flights are
operated by more than one competitor or up to five if one single competitor,
- Up to five daily return flights between Paris and Rome.
- Up to three daily return flights between Paris and Venice,
- Up to two daily return flights on each of the following routes: Paris-Bologna,
Paris-Florence and Lyon-Milan,
- One daily return flight between Paris and Naples.
In practice, however, the number of slots that the parties will need to surrender will
be lower because a number of competitors have emerged on the Paris-Milan, ParisRome, Paris-Naples and Paris-Venice routes since the alliance was announced3.
These competitors have entered the market because the routes concerned are
attractive enough and slots became available as a result of events not directly linked
to the alliance between Air France and Alitalia (bankruptcies of several airlines
holding slots at Paris-Orly).
The slots surrendered by Air France and Alitalia will enable, for instance on ParisRome, (i) either the competitor currently operating flights on this route to increase its
services up to five daily return flights or (ii) another competitor to start new services
so that, in total, 5 daily return flights are operated in competition with the alliance
partners. The slots will be made available on a preferential basis to the competitor
who will operate in total the highest number of frequencies on the route (including its
existing services).
In the event any of the actual competitors were to exit the market, Air France and
Alitalia would need to make their own slots available to others rivals in order to
restore the level of competition sought by this decision.
As with other air alliances, the decision contains the necessary measures to ensure
the new entrants a fair chance to establish themselves as credible competitor. Some
of the measures will enhance the inter-changeability, from the customer point of
view, between the flights operated by the two partners and the flights operated by
competitors on the affected routes. In particular, the former will allow rivals to
participate in their frequent flyer programmes, if they so wish. Another commitment
allows passengers to fly with the Parties and return with a competitor or conversely
on a given journey, based on a single ticket.
The two partners are also required not to increase their offer of flights on the affected
routes again to give competitors a fair chance to compete.
2
3
A return flight requires two pairs of slots: two at airport A (one for take off + one for
landing) and two at airport B, which makes a total of four slots.
Volare operates three daily return flights (DRF) between Paris and Milan Malpensa and
Easyjet operates one daily return flight between Paris and Milan Linate; Volare also
operates three DRF between Paris and Rome, two between Paris and Venice; and
Meridiana has two DRF between Paris and Naples.
2
Finally, the alliance partners also committed to facilitate inter-modal passenger
agreements in order to offer greater choice and better multi-modal transport services
to consumers. This, for instance, would allow customers to combine a one way
railway trip with a return flight at attractive conditions
The Commission’s clearance was granted for a period of six years, starting from the
date of notification, i.e. 12 November 2001.
Background
The alliance will give Alitalia customers access to more than 100 new destinations
while Air France customers will be offered about 20 new routes. The agreements
enable the two carriers to cooperate across their respective networks in terms of
pricing, scheduling and capacity. The parties, amongst other things, agree on prices
and share earnings on routes between France and Italy.
The Commission looks favourably on the consolidation on the airline sector, but
needs to ensure that this is not to the detriment of consumers.
The number of international airline alliances and similar forms of co-operation
agreements has significantly increased in the last 10 years. Examples of alliances to
which the Commission granted a six-year antitrust immunity include
Lufthansa/Austrian Airlines, British Airways/SN Brussels Airlines and BA/Iberia.
In February 2004, the Commission also cleared, subject to conditions, the merger
between Air France and KLM which will build the largest airline group in Europe4.
The Commission is also still reviewing the impact on competition of the Skyteam
alliance between Air France, Alitalia and Delta among others.
4
See Commission Decision of 11 February 2004 declaring a concentration to be
compatible with the common market (case n°IV/M.3280 Air France/KLM) according to
Council Regulation (EEC) N°4064/89).
3