Transport Airlines

Lufthansa and United trans-atlantic partnership approved by EU officials

May 23, 2013 7:18 am

Skift Take

Consolidation isn’t just happening within countries; international airlines are also increasingly seeking partnerships that allow the carriers to cut costs while increasing revenue.

— Samantha Shankman

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Lufthansa and United side-by-side at Chicago O'Hare Airport. InSapphoWeTrust / Flickr


Deutsche Lufthansa AG and United Continental Holdings Inc. reached a settlement with European Union antitrust regulators, ceding airport slots in Frankfurt and New York in exchange for approval of their A++ trans- Atlantic venture also involving Air Canada.

The European Commission said that the airlines also committed to reach ticketing and flight connection agreements with competitors as part of settlement, which resolved concerns that the venture would drive up ticket costs for trans-Atlantic passengers. The decision allows the A++ venture to go ahead without the risk of EU fines.

“Thanks to the commitments offered by the three airlines, passengers on the Frankfurt-New York route will benefit from stronger competition,” Joaquin Almunia, the EU’s antitrust commissioner, said in a statement on the regulator’s website. “This decision is a further milestone in our effort to create a level playing field on trans-Atlantic aviation markets.”

Carriers are increasingly seeking partnerships on sales and scheduling to cut costs and boost revenue. A pact involving Oneworld allies British Airways and Iberia of Spain — now merged as IAG SA — and American Airlines won EU approval in July 2010 after the carriers agreed to give up 10 operating slots in the U.K. and U.S. to maintain competition. A similar tie-up between between SkyTeam members Air France-KLM Group, Delta Air Lines Inc. and Alitalia SpA remains under scrutiny, the commission said today.

Joint Venture

Lufthansa, United and Air Canada were told by the EU in October that their proposed joint venture agreement may infringe antitrust rules because it could end competition between Lufthansa and United on the Frankfurt-New York route and harm rivalry between the trio for first- and business-class passengers, the EU said. The EU started probing the accord between the members of the Star Alliance in 2009.

The agreement announced today will enable rivals to start as many as seven weekly flights between Frankfurt and New York’s John F. Kennedy or Newark Liberty airports, according to the commission.

Lufthansa and the other A++ carriers have also agreed to reach agreements with competitors that would make it easier for these other airlines to arrange connecting flights.

Market Test

The carriers will “submit data concerning their cooperation, which will facilitate an evaluation of the alliance’s impact on the markets over time,” the commission said. The commitments agreed on with the airlines, including the slot rules, are legally binding for 10 years.

Antitrust officials conducted a wider-than-usual test with customers and rivals to gauge the venture’s possible impact on market efficiency, the commission said.

This “broadened” exercise included an assessment of the knock-on effects of the deal on shorter-haul and connecting flights that could be taken from Frankfurt or New York, it said.

“This is something we could also apply in the future,” Antoine Colombani, a spokesman for Almunia, told reporters today.

United Airlines parent UAL Corp. and Continental merged in 2010 to form Chicago-based United Continental Holdings.

With assistance from Stephanie Bodoni and Chris Jasper in London.

Editors: Peter Chapman and Tom Lavell.

To contact the reporter on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net. To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.

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