EC Questions Value Of IATA Tariff Conferences

The European Commission this week began seeking comment on a recently published consultation paper questioning whether the International Air Transport Association passenger tariff conferences should remain exempt from the EC's ban on restrictive business practices. The EC is trying to determine if a primary consumer benefit of such conferences--airline cooperation on multi-carrier interline fares--can be achieved without providing a forum for carriers to reduce price competition.

The current block exemption on interline fare agreements expires June 30. The EC cited such developments as global airline alliances and bilateral codeshare agreements as representative of "a significant increase in alternative offers to traditional IATA interlining." The EC also said 85 percent of all flights within the European Union are direct and "may therefore involve no or little interlining."

An earlier consultation paper published by the EC last summer drew mixed responses from the industry. "While airlines favor a prolongation of existing exemptions, corporate customers and travel agents do not," the EC said in a statement.

"If there were no longer a general interlineability for all carriers, then in all probability interline sectors would be opened selectively for specific carriers and thus be detrimental to competition," said Lufthansa German Airlines in its comments submitted last summer following the earlier consultation paper. "The handling of this concept would be disproportionately expensive and due to the large data volume be of high complexity."

In its comments, Air France said "the IATA multilateral system is the most convenient at the lower cost for connecting travelers and shipments in particular where alliances or airlines through codeshare arrangements do not propose online services."

Taking an opposing viewpoint, the Corporate Travel Action Group, claiming to represent the interests of corporate travel buyers, last summer estimated that only 5 percent of corporate travel tickets are fully interlineable IATA fares. "In the case of major corporations with a managed travel policy, this figure is virtually nil," CATG said in its filing. "Effective competition already exists on most major routes, and even on routes where duopolies prevail. There is no reason to believe, or evidence to suggest that stopping the conference mechanism will limit competition."

EC competition commissioner Neelie Kroes this week said that "interlining is in principle good for consumers, but price fixing is not." Still, he said he would withhold final judgment on current processes until more feedback is collected. New comments based on the more recent consultation paper must be submitted by April 1.