joint-venture partners Lufthansa and United Airlines offered to surrender slots
to competitors for Frankfurt-New York flights after the European Commission in
October 2012 found that the Atlantic Plus-Plus joint-venture is "likely to
restrict competition" on that route "with regard to premium
Alliance founders Lufthansa and United are willing to relinquish up to seven
weekly pairs of arrival and departure slots at Frankfurt and either New York JFK
or Newark airports. They also offered to make their premium fares combinable
with those of other carriers competing on the route; provide pro-rated fares
for many multi-leg itineraries that include that route; and to open their loyalty
programs to competitors which begin or increase service on the route if those
competitors have no equivalent program of their own.
December 21 officially announced the Atlantic Plus-Plus offer and told interested
parties to respond within a month. However, the announcement apparently went
unnoticed by many in the corporate travel industry.
July 2008 launched an investigation into Atlantic Plus-Plus, which also
includes Air Canada and Continental Airlines (now part of United). Through the
JV, the airline partners aim to coordinate pricing, capacity, schedules and
marketing on transatlantic routes. When EC issued its preliminary assessment in
October, it concluded that competition would be restricted only on the
Frankfurt-New York route.
the parties' combined market position on the Frankfurt-New York route and the
closeness of competition between Lufthansa and Continental, the cooperation
would be ... likely to produce appreciable anticompetitive effects for premium
passengers," according to EC. Customers on that route "are relatively
price inelastic and largely deprived of significant buying power."
added that new competition is "unlikely" due to "substantial
barriers to expansion and entry. These barriers to expansion and entry include
slot constraints, hub advantages at both Frankfurt airport and New York JFK and
Newark Liberty airports, as well as the frequency advantage of the
EC launched the investigation more than four years ago, United and Continental
merged, and Lufthansa subsidiaries Austrian Airlines and Swiss joined Atlantic
Plus-Plus and Frankfurt airport opened a fourth runway.
while Atlantic Plus-Plus today faces competition on Frankfurt-New York from
Delta Air Lines and Singapore Airlines (a Star Alliance member but not an Atlantic
Plus-Plus partner), it enjoys monopolies between Frankfurt and Chicago, San
Francisco and Washington. Furthermore, German travel managers continue to
express concern about Lufthansa Group monopolies on most city pairs from
Germany to Austria, Belgium and Switzerland.
York is only the tip of the iceberg," said Hans-Ingo Biehl, executive
director of VDR, a German travel managers association. "We see an
increasing airline concentration in several markets within Europe and intercontinental
traffic. It's quite clear: reduced competition leads to higher prices for
consumers, higher costs to corporates, a weakened procurement position and in
consequence a diminished travel program. However, open slots don't necessarily
mean new competition because of the difficult circumstances and parameters the
airline industry is currently facing."
Germany-based global travel manager speaking on condition of anonymity said he
was "encouraged" by EC's finding and asked, "Why don't they look
at all the monopolies? It means reduced competition through alignment of rates
and capacity. There are fewer suppliers out there for us to talk to."
response to a question from BTN, an EC
spokesperson wrote: "The Commission conducted a detailed competition assessment
of all routes covered by the Atlantic Plus-Plus agreement where the parties
were (or would otherwise be) in competition. As part of this investigation, the
Commission however did not review the routes where the Atlantic Plus-Plus parties'
air passenger services did not overlap prior to the cooperation, such as the
routes from Germany to Switzerland, Austria and Belgium. These routes formed
part of the competition assessment at the time of the respective merger reviews
by the Commission."
spokesperson added that EC now is analyzing Lufthansa's and United's
commitments and comments from interested parties. Should it be satisfied that
the partners' proposed remedies would be "effective, sufficient and
timely," EC may opt to make those commitments binding.
for a comment on its proposed Frankfurt-New York remedy, a Lufthansa spokesperson
said: "We believe that the published commitments address the Commission's
concerns. We will continue to work with the Commission to complete its
investigation of the joint venture."