Select Committee on European Communities Thirty-Second Report


  37.    The airline industry is a global industry and we do not believe it is possible to study the airline industry in the European Union in isolation from the rest of the world. Any developments in the industry within the European Union will inevitably impact on the global industry—and vice versa—and this is true of the proposals which are the subject of our report. This report, therefore, as a matter of necessity, looks wider than just the European Union in assessing the likely effect of the Commission proposals under scrutiny.

  38.    The Commission's proposals, in themselves, make no fundamental change to the Community's Competition Rules. They do, however, effect a major change in the allocation of responsibility for their enforcement. But, in the Committee's opinion, the implications of these Regulations would go far wider. Indeed, we believe that the proposed Regulations would fundamentally alter the way in which the market in air transport operates, both within the European Union and between the European Union and third countries. It is the wider implications of these Regulations which form the substance of our report.

  39.    When the Committee originally decided to conduct this enquiry, negotiations were continuing over the proposed British Airways (BA)-American Airlines (AA) alliance[14], and on 8 July 1998, the Commission, together with the Department of Trade and Industry in the United Kingdom, published their draft conditions for that alliance to gain regulatory approval[15]. As several of our witnesses pointed out, this proposed alliance is a good example of the direction in which the airline industry has moved towards consolidation in the last 20 years. However, as negotiations in this case were still proceeding, and despite the highly relevant nature of the proposed alliance to the subject of this enquiry, we avoided enquiring into the details of this case. This is reflected in the conclusions of our report which are concerned with the implications for the European airline industry as a whole rather than any one specific airline.

  40.    We received written and oral evidence from organisations involved in the field of air transport. We also visited Brussels to discuss the proposal with Commissioner van Miert, Commissioner for Competition, and officials in both DG IV (Competition) and DG VII (Transport). We are grateful to those witnesses who gave evidence. We also thank our Specialist Adviser, Dr George Williams of the Air Transport Group, Cranfield University, for his guidance through this often complex enquiry.  

  41.    We are aware of the sensitive commercial implications raised by the subject of this enquiry, but we were nonetheless disappointed that we were unable to consider evidence from several organisations. We understood the reasons given by Cathay Pacific, Singapore Airlines and the Monopolies and Mergers Commission for declining to give evidence. It is regrettable, however, that Air France declined even to respond to our invitation to give evidence, either written or oral.

  42.    The members of Sub-Committee B (Energy, Industry and Transport) who conducted this enquiry are set out in Appendix 1. Our witnesses are listed in Appendix 2. Appendix 3 shows the membership of the two largest global alliances and, as an example of the complexity of airline alliances, lists the airlines operating services on behalf of Lufthansa.

14   The Commission also has a number of other international alliances under examination. Back

15   Press Releases, Department of Trade and Industry P/98/549 and European Commission IP/98/641, 8 July 1998. Back

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