April 20, 2009 / 5:09 PM / in 9 years

EU probes Star airline alliance pacts

BRUSSELS (Reuters) - The European Commission launched two antitrust investigations on Monday against certain members of the Star and Oneworld airline alliances on concerns their agreements on transatlantic routes might breach EU rules.

The probe relates to two sets of agreements between Star Alliance members Air Canada, Continental, Lufthansa and United on the one hand, and between Oneworld members American Airlines, British Airways and Iberia on the other.

The competition watchdog of the 27-nation European Union said the agreements provided for the coordination of the airlines’ commercial, marketing and operational activities principally on routes between the EU and North America.

“This is a normal part of the process of examining anti-trust immunity for the proposed alliance. We are relaxed about the commission’s decision,” a spokesman for Spanish carrier Iberia said in a statement.

Last year, the EU launched an investigation into a planned tie-up between Iberia, British Airways and American Airlines after the trio said they had agreed to a transatlantic tie-up, to take advantage of the U.S./EU “Open Skies” agreement.

American, BA and Iberia intend to cooperate commercially on flights between the United States, Mexico and Canada and the European Union, Norway and Switzerland.

A spokesman for Lufthansa said the German carrier had been informed of the probe ahead of time and it was delivering information to the Commission. United’s UAL Corp said the probe was a standard step which it had anticipated.

Stephen Rose, partner and competition lawyer at London-based Eversheds, said the probe meant the Commission was looking very carefully at aspects of the agreements, and the airlines were likely to get very detailed questions from the Commission.

“Indeed they may already have had a quite a few, they are going to be in an ongoing dialogue with the Commission, to explain and justify the extend of their cooperation,” he added.

“It is significant because there is a risk of fines if the Commission finds something it really does not like,” he added.

If it found that the airlines had broken EU rules, the Commission could order them to stop any illegal practices and fine them up to 10 percent of global turnover.

“When you have cooperation between airlines in such areas as pricing, schedules and capacity, we have to make sure that the consumer actually benefits,” Jonathan Todd, a spokesman for the European Union’s executive Commission, told a news briefing.

A Commission statement said the level of cooperation under the arrangements in question appeared far more extensive than that generally extended between those airlines and others in the Star and Oneworld alliances.

The Commission said it would assess whether these joint activities may restrict competition but that it had no dispute over the formation of airline alliances as such.

“What we have potentially a problem with is the very specific and detailed cooperation between these airlines on such issues as schedules, capacity and pricing,” Todd said.

Additional reporting by Ben Harding in Madrid and Angelika Gruber in Frankfurt; Editing by Dan Lalor

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