Lufthansa-United Atlantic Venture Wins EU Antitrust Approval

Deutsche Lufthansa AG (LHA) and United Continental Holdings Inc. (UAL) reached a settlement with European Union regulators, ceding sufficient slots for a single daily flight between Frankfurt and New York in exchange for approval of their A++ trans-Atlantic venture also involving Air Canada. (AC/B)
The European Commission said the Star Alliance members also committed to reach agreements with competitors on ticketing and flight connections, resolving concerns that the venture would drive up prices for trans-Atlantic passengers. The decision allows the A++ venture to go ahead without the risk of EU fines.
“Thanks to the commitments offered by the three airlines, passengers on the Frankfurt-New York route will benefit from stronger competition,” Joaquin Almunia, the EU’s antitrust commissioner, said in a statement on the regulator’s website. “This decision is a further milestone in our effort to create a level playing field on trans-Atlantic aviation markets.”
Carriers are increasingly seeking accords on scheduling and sales to cut costs and boost revenue. A pact involving Oneworld allies British Airways and Iberia of Spain — now merged as IAG SA — and American Airlines won EU approval in 2010 in return for the surrender of seven daily slots pairs. A tie-up of SkyTeam’s Air France-KLM (AF) Group, Delta Air Lines Inc. (DAL) and Alitalia SpA remains under scrutiny, the commission said.
Frequencies Maintained
According to the agreement announced today, Lufthansa will surrender a single daily slot to be used by a rival carrier for Frankfurt-New York flights. While the German company may need to modify its timetable to accommodate the change, it will retain a service of three flights per day between the cities.
“We are pleased with the EC’s decision,” Lufthansa spokesman Boris Ogursky said, adding that the agreement reflected an understanding of the joint venture accord’s benefits to customers on both sides of the Atlantic.
Lufthansa, United and Air Canada (AC/A) were told by the EU in October that their accord might infringe antitrust rules by ending competition between Lufthansa and United on Frankfurt-New York services and between the trio for first- and business-class passengers. The EU started probing the accord in 2009.
The approved deal will enable rivals to start as many as seven weekly flights between Frankfurt and New York’s John F. Kennedy or Newark Liberty airports, as submitted by the parties in December, the commission said today.
Lufthansa and the other A++ carriers have also agreed to reach agreements with competitors that would make it easier for those airlines to arrange connecting flights.
Market Test
The Star carriers will “submit data concerning their cooperation, which will facilitate an evaluation of the alliance’s impact on the markets over time,” the commission said. The commitments agreed with the airlines, including the slot rules, are legally binding for 10 years.
Antitrust officials conducted a wider-than-usual test with customers and rivals to gauge the venture’s possible impact on market efficiency, the commission said.
This “broadened” exercise included an assessment of the knock-on effects of the deal on short-haul and connecting flights that could be taken from Frankfurt or New York, it said.
“This is something we could also apply in the future,” Antoine Colombani, a spokesman for Almunia, told reporters.
United Airlines parent UAL Corp. and Continental merged in 2010 to form Chicago-based United Continental Holdings.
Bloomberg, May 23, 2013