In 2009 and 2010, airlines flying routes from the United States and the European Union signed a pact to streamline their activities on the transatlantic flights. The pact allowed the airlines to coordinate their operations in terms of schedules, pricing, capacity, and revenue for the transatlantic segment. The agreement has been helpful to the airlines, but has it hurt the paying passengers? The EU Regulators are about to shed light on this matter as they intend to investigate the pact and its impact to the passengers.
The pact between Air France – KLM, Delta, and Alitalia to coordinate their operations for transatlantic routes may have been having a negative impact on the rates that the passengers have to pay and the services that they are receiving. The EU Regulators intend to find out if the absence of competition for these transatlantic routes has left passengers at the mercy of the airlines and is actually hurting them.
The pact has enabled these airlines to not only share revenues but also losses that may have been incurred for the transatlantic routes. This type of agreement has much more benefit to the airlines than experiencing mergers. Mergers between airlines are costly and such a pact is much better than having two or more airlines merge.
The rising cost of aircraft fuel is one of the reasons why airlines have gone into a pact like this. In order to minimize losses, airlines agree to instead of competing with each other, they cooperate with one another by sharing almost everything on the transatlantic routes; this includes ticket sales, revenues and losses.
Unfortunately, removing competition from the picture may mean that the rates may no longer competitive as competition no longer exists. The services that these airlines provide may have also been negatively affected. This is the reason why EU Regulators are going to find out if such agreements are actually hurting passengers on the US-EU routes. The Regulators are attempting to find out if such joint ventures between airlines are in breach of EU antitrust rules.
A spokesperson for Delta said that the investigation would only cover a small number of routes and that any concerns would be resolved. Air France – KLM expressed that all of the airlines being investigated concerning the matter would fully cooperate with the Commission.
On the other hand, US Regulators have given the members of the alliances antitrust immunity to further intensify cooperation. More alliances have started requesting antitrust immunity as well for the same reasons.
Lawyers in the aviation industry do not expect that the Brussels lead commission will disband any of the alliances but may require more concessions. The investigation into this alliance could spark investigations into other alliances as well.
A spokesperson for the commission said “The goal is to ensure that this tie-up does not harm passengers on the EU-US routes”.
The increasing cost of aircraft fuel is taking its toll on the airline industry. Airlines are finding ways to stay in the skies by forging alliances. However, such alliances should not harm passengers.