United and Lufthansa may cede slots at JFK and Frankfurt to get regulators off their backs

Deutsche Lufthansa AG and United Continental Holdings Inc. may cede airport slots in Frankfurt and New York in a bid to end a European Union antitrust probe of their A++ trans-Atlantic venture also involving Air Canada.

EU regulators said they are seeking views from competitors and customers on the offer that would 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 a statement on the European Commission’s website today. A settlement would permit the venture to go ahead without the risk of EU fines.

“The A++ carriers prefer a pragmatic resolution and have thus been discussing with the commission commitments for the Frankfurt-New York route that are similar to commitments given in other alliance cases,” the three airlines said in a joint statement. The companies believe the case “may be settled without admission or recognition of liability.”

Carriers are seeking partnerships on sales and scheduling to cut costs as rising fuel prices and a sluggish economy hurt profits. Cooperation between airlines has triggered three other recent EU probes into ticket-sales agreements and a trans- Atlantic pact between SkyTeam members Air France-KLM Group, Delta Air Lines Inc. and Alitalia SpA. The EU fined carriers including Air France-KLM, British Airways Plc and Japan Airlines Corp. in 2010 for colluding on air-cargo fuel and security surcharges.

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.

To allay EU concerns, the airlines have also offered fare agreements with carriers operating on the Frankfurt-New York route for premium passengers and to start agreements with connecting flights from Europe or Israel to North America, the Caribbean and Central America that fly via Frankfurt-New York. They also propose opening up their frequent-flyer programs to a competitor.

New York

Competitors may choose which arrival and departure slots at Frankfurt and New York they take on to allow as many as seven additional weekly flights, according to the offer. This could rise to 21 weekly flights if a rival pulls out of the route. The airlines don’t have to release more than one slot at New York JFK.

The airlines’ rivals and customers have a month from today to tell regulators whether the offer would answer antitrust concerns. After this so-called market test, the EU can then decide on a formal settlement that ends the antitrust probe without imposing fines or declaring that the companies breached competition law.

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

With assistance from Richard Weiss in Frankfurt. Editors: Peter Chapman, Tom Lavell. To contact the reporters on this story: Aoife White in Brussels at awhite62@bloomberg.net. Jim Brunsden in Brussels at jbrunsden@bloomberg.net. To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.