Brussels, 01/07/2002 (Agence Europe) - The Commission has informed Air France and Alitalia that it has serious doubts that their co-operation agreement can be approved in its current form. On 12 November 2001 the parties notified to the Commission a number of co-operation agreements and requested an exemption under competition rules, more precisely under Regulation 3975/87 and the Commission published a summary of the agreements in OJ C111 on 8 May 2002, inviting third parties to submit their views. The Commission believes at this stage that the agreement will significantly reduce competition on key routes between France and Italy, including between Paris and Rome and Milan where Air France and Alitalia hold massive market shares. The pooling of forces between the two flag carriers will also make it difficult for third parties to enter the routes concerned, so the Commission has invited both companies to reconsider the terms of their agreement to protect consumers and allow a wide choice and healthy competition in terms of prices.
The agreements pursue the double aim of integrating Alitalia into the world-wide SkyTeam alliance created by Air France and Delta Air Lines, and of building a far-reaching, long-term strategic bilateral alliance based on close co-operation between the parties. The agreements would interconnect the two airlines' respective hubs at Paris-Charles de Gaulle, Rome Fiumicino and Milan Malpensa. Under the current co-operation agreement, Air France and Alitalia will agree on passenger capacity, flight frequencies and prices to be charged on flights between France and Italy. The agreements also involve code-sharing, sharing of earnings and the pooling of frequent flyer programmes. The Commission points out that bilateral co-operation agreements in the airline sector and especially between national flag carriers often eliminate competition on the routes concerned, making customers suffer since they may no longer benefit from competitive prices. The spokesperson for Commissioner Monti, Amelia Torres, said that these are very advanced agreements that are very far-reaching. When signed by two national airlines they inevitably raise competition concerns. She said that the Commission's warning in no way implied that the Commission would decide against the agreement, but was simply a perfectly standard stage of the procedure. After publication of the agreement in the Official Journal, the Commission has 90 days in which to decide whether to raise objections. If it had not raised doubts, the agreement would have automatically been exempted for a period of six years from the date of publication. Through the letter of serious doubts, the Commission informed the parties that they must review the terms of their agreement and see how they can resolve the issues raised by the Commission. Torres stressed that no detailed timetable had been set for this. If the companies put forward a suitable solution the Commission could take a favourable decision "very quickly", otherwise it would have to send a letter outlining its grievances in the form of an official warning, she added, without indicating what solutions might be considered at that point. Commissioner Monti said: "The final outcome of the case will depend on Air France's and Alitalia's response and particularly on their ability to create conditions to favour the emergence of new competitors on the affected routes, failing which passengers would have little or no choice and potentially higher prices. I invite the two airlines to start discussions with the Commission on possible remedies as soon as possible".