CMA consults on BA and American Airlines commitments

Direct News Source

CMA consults on BA and American Airlines commitments

British Airways and American Airlines have offered commitments to resolve the CMA's competition concerns over an agreement about airline routes between the UK and US.

The airlines will make slots available at London Heathrow or Gatwick airports as part of a wider package of measures to resolve competition concerns regarding their joint business on certain routes between the UK and US.

This year will see the expiry of a set of binding commitments that the European Commission accepted in 2010 after a competition investigation into the Atlantic Joint Business Agreement (AJBA). Five airlines are currently signed up to the AJBA: three members of the International Airlines Group - British Airways (BA), Iberia and Aer Lingus - and American Airlines (AA) and Finnair. Under the terms of the AJBA, these airlines have agreed not to compete on routes between the UK and the US. BA and AA are the key UK and US parties to the AJBA.

Ahead of the expiry of the commitments, the Competition and Markets Authority (CMA) launched an investigation into the AJBA in October 2018, reflecting the fact that 5 of the 6 routes subject to commitments are from the UK and to prepare for the time when the European Commission would no longer have responsibility for competition in the UK. The CMA examined the impact on customers on UK-US routes from the loss of competition due to the AJBA. It assessed the competition from other airlines on each route and the benefits that the AJBA may deliver including improved schedules, connections and new routes. It identified potential competition concerns on routes between London and each of Boston, Chicago, Dallas, Miami and Philadelphia.

As a result of the CMA's investigation, BA and AA have offered measures to try to resolve the concerns. The proposed package, includes:

Releasing additional take-off and landing slots at London Heathrow or Gatwick airports to enable competitors to begin or increase non-stop flights between London and Boston, Dallas and Miami.

Measures to support competing services on these routes as well as on the London to Chicago and London to Philadelphia routes, including access to connecting passengers on preferential terms.

The next step is for the CMA to seek views on the proposed package, but this comes at a time when the coronavirus (COVID-19) pandemic is having a major impact on the aviation sector. In the CMA's discussions with airlines, they have emphasised the importance of certainty about the future availability of slots, due to the imminent expiry of the 2010 commitments. The CMA is therefore proceeding to market test the proposed package but is also giving additional time for responses if required. In addition, the commitments allow for the CMA to review the AJBA if competitive conditions are different in the future, for example, when the sector is expected to have emerged from the pandemic.

Ann Pope, Senior Director, Antitrust at the CMA, said:

The CMA launched this investigation because we were concerned that, with the expiry of the current commitments, consumers might lose out since - without some kind of mitigation - the Atlantic Joint Business Agreement reduces competition on key routes between the UK and the US. On some of these routes there are either few or no other airlines offering direct flights to passengers.

We therefore welcome the offer from BA and American Airlines to find a way of addressing the CMA's concerns. Their suggested resolution has the potential to increase competition and deliver lower fares for customers, while also preserving the benefits that joint airline agreements offer passengers. We are acting now as the current commitments expire this year, but can review the agreement in the future if the market does not return to its pre-COVID state.

The CMA is consulting interested parties before taking a decision on whether to accept the commitments. The consultation runs until 5pm on 4 June 2020. Given the current exceptional circumstances the consultation may be extended if organisations require more time to respond.

More information on this investigation can be found on the case page.
Notes to editors:

BA is owned by International Consolidated Airlines Group SA.

Aer Lingus is a signatory to the AJBA but is not yet operating any services as part of the AJBA as the participation of Aer Lingus is subject to the United States Department of Transportation extending Anti-Trust Immunity (currently under review).

The CMA is today publishing its Notice of Intention to Accept Binding Commitments. Comments from interested parties are invited until 4 June 2020.

The CMA has been investigating the Atlantic Joint Business Agreement since 2018 and its competition concerns on the transatlantic airline sector are based on its assessment of the competitive position prior to the COVID-19 pandemic. The CMA considers that the competition concerns it has identified in relation to the routes of concern remain and should be addressed and, having undertaken a market testing process, it will be in a position to decide whether, in principle, these commitments address the CMA's competition concerns. The commitments package is for a ten-year period, but it is open to the CMA to review the AJBA sooner if competition does not return to pre-COVID-19 conditions.

Following an investigation under EU competition law, in 2010 the European Commission accepted commitments from the parties in relation to 6 routes to address competition concerns: London-Dallas, London-Boston, London-Miami, London-Chicago, London-New York and Madrid-Miami. These included a commitment to make landing and take-off slots available to competitors at either London Heathrow airport or London Gatwick airport. These commitments were binding for 10 years. See the Commission's Commitments Decision for more information.

On expiry of the parties' commitments, due in 2020, the European Commission may re-assess the agreement, but there is no requirement for it to do so. As 5 of the 6 routes subject to commitments are from the UK, and to prepare for the time when the European Commission no longer has responsibility for competition in the UK, the CMA decided to review afresh the competitive impact of the agreement in anticipation of the expiry of the commitments.

Formal acceptance of the commitments would result in the CMA terminating its investigation and not proceeding to a decision on whether the Competition Act 1998 or the Treaty on the Functioning of the European Union (TFEU) have been infringed. Accordingly, a decision by the CMA accepting binding commitments will not include any statement as to whether or not the conduct of any of the parties has infringed the Competition Act 1998 or the TFEU either prior to the acceptance of the commitments or once the commitments are in place.

The CMA has engaged with the European Commission and the US Department of Transportation throughout the investigation to date.

Further detail of the CMA's procedures in Competition Act 1998 cases is available in our guidance.

This press release was sourced from Gov.uk on 07-May-2020.