EUROPEAN TRAVEL POLICY, 8 July 2002

EUROPEAN TRAVEL POLICY – INSTANT NEWS ON TRAVEL POLICY IN EUROPE

PARTNERSHIP BETWEEN AUSTRIAN AIRLINES AND LUFTHANSA GETS EU OK

EUROPEAN TRAVEL POLICY, 8 July 2002

The European Commission has approved the partnership between Lufthansa and Austrian Airlines after the two airlines successfully answered the Commission’s concerns that consumers would be left with no choice of carriers between Austria and Germany – with a risk of higher prices being imposed. To prevent a quasi-monopoly in air services between the two neighbouring countries, the airlines offered to make available to new market entrants up to 40 percent of the airport slots used to operate flights on all bilateral routes, such as Vienna-Berlin, Vienna-Frankfurt and Vienna-Stuttgart. Lufthansa and Austrian Airlines also agreed to reduce fares on the routes on which they do not face any competition to an extent similar to the fare reduction on city pairs where rivals start operations.

The co-operation agreement was granted antitrust immunity retroactively from 10 December 1999, when it was activated, to 31 December 2005. " I am particularly satisfied that a number of airlines have expressed an interest in entering the market between Austria and Germany and that two of them have already started flying on the Vienna-Frankfurt and Vienna-Stuttgart routes. Without the Commission’s action there would have been a monopoly, which would not have been in the consumer’s interest," European Commissioner Mario Monti commented on announcing the decision.

Adria Airways of Slovenia last year started flying twice a day on the Vienna-Frankfurt route and Air Alps operates a daily flight between Vienna and Stuttgart after Lufthansa and Austrian volunteered to apply the remedies even before the Commission took its final decision. In addition, two other airlines from central and eastern Europe have expressed interest in two further major routes between Austria and Germany, and a new Austrian airline, Styrian Airways, has been created which envisages starting operation on a additional routes this autumn.

In December 1999, Austrian and Lufthansa sought approval under EU competition rules for a co-operation agreement allowing them to co-ordinate fares and schedules for all flights world-wide. In May 2001 the Commission warned that the agreement would eliminate competition on virtually all 33 routes between Austria and Germany. Since then, a package of remedies has been put in place to ensure that consumers would not suffer from the two airlines’ dominant position.

The undertakings also include a commitment that each time they reduce a published fare on a route where they face the presence of a new entrant, Austrian and Lufthansa will be obliged to apply the same fare reduction, in percentage terms, on three other Austrian-German city pairs on which they do not have competition – so as to ensure that passengers enjoy the benefits of competition including on routes where they maintain a monopoly position. They are also obliged to allow new entrants to participate in their frequent flyer programmes if they do not have their own and if they so wish. Other commitments relate to interlining and to inter-modal agreements in particular with railway companies, to ensure greater choice and better transport services for consumers.

WORLD TOURISM ORGANIZATION BACKS AIRLINE MUTUAL INSURANCE

EUROPEAN TRAVEL POLICY, 8 July 2002

World Tourism Organization Secretary-General Francesco Frangialli has written to ministers of tourism asking them to support the International Civil Aviation Organization proposal for a global mutual insurance solution to the problems of the airline sector. Pending resolution of the threat by insurance companies to cancel war risk and anti-terrorism insurance worldwide in the wake of the 11 September attacks, there is a lack of stability for airline operations, he says. "This affects all companies and markets but is of particular importance to smaller developing markets whose tourism is entirely dependent on air transport links", he argued. WTO says the airline sector, which is fundamental to the long-term development of tourism, was one of the hardest hit in the recent tourism crisis. It believes the ICAO initiative can, with the support of the private sector through the International Air Transport Association, have "broader strategic scope in demonstrating the importance of the tourism sector and hence its need for adequate reasonably priced air service."

MORE EUROPEAN PARLIAMENT MOVES ON AIRCRAFT NOISE

EUROPEAN TRAVEL POLICY, 8 July 2002

The European Parliament’s environment committee will discuss on July 10 the draft report by Dutch centre-right Euro-MP Hans Blokland on noise classification of civil subsonic aircraft for the purposes of calculating noise charges. This EU proposal, which the Parliament is looking at for the first time, aims at enhancing the environmental effectiveness of noise charges levied at airport level, by ensuring that common criteria based on the noise performance of aircraft are used when calculating the level of these charges for environmental purposes. Blokland considers that the main aim of noise charges is to promote quieter aircraft, and that it would be better to make noise charging compulsory at all airports. This will also prevent distortions of competition and noise dumping, he says. He suggests that different basic charges apply during the day and at night.

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