EC Targets Agency Rewards

<B> EC Targets Agency Rewards</B>

By Amon Cohen

The European Commission has told more European airlines to tone down travel agency incentives in their home markets after receiving a complaint from British Airways.

The Commission has warned eight European flag-carriers to conform to a set of principles it issued in July. These allow an airline to reward an agency in its home market for increasing its value to the carrier and for reducing BA's distribution costs, but forbid overrides based on exceeding sales made in a preceding period.

The Commission issued these principles at the same time that it fined BA 6.8 million euros for its override deals with agents in the United Kingdom (BTN, July 19), denouncing them as abuse of a dominant position. BA noted it was following the same sales policy as virtually every other EU carrier.

The Commission said it singled out BA because it was the only airline about which it had received a complaint (from Virgin Atlantic). BA promptly launched an identical complaint about Lufthansa, SAS, Sabena, Air France, Alitalia, KLM, Austrian Airlines and Olympic Airways, though not Oneworld partner Iberia.

"We have sent the principles to all eight defendants and we hope and suppose that they will comply with them," said Stefan Rating, spokesman for the European Commission's competition department. "We will check up on them and if they have not complied, we will take action against them."

Yet this octet is unlikely to change their agreements in the near future. Despite its words, the Commission has set no deadline by which the airlines must put their home market agency agreements in line with the principles.

"The airlines are all saying it doesn't apply to them and there has been no sign of them volunteering to change," said Mike Platt, chief operating officer of Business Travel International. "There will have to be a lot more arm-twisting first."

BA is not confident either that the Commission will match its words with deeds.

"We will be monitoring it very closely and if we see no change, then we will seriously consider suing the airlines," a source at BA said.