The European Commission (EC) has confirmed a formula to limit what it sees as Air France-KLM, Delta Air Lines and Alitalia dominance on a few key transatlantic routes. The US government has already approved the joint venture among the three SkyTeam members across the Atlantic which allows them to jointly manage schedules, fares and capacity as well as share profits on specific routes.
On this side of the Atlantic the EC has been investigating concerns that the arrangement is potentially anti-competitive for all passengers on the New York-Rome and New York-Amsterdam routes and for premium class passengers on New York-Paris. The SkyTeam members have mollified the concern with an interesting package of offers.
The EC's concern was rooted in what it saw as high barriers to entry for other carriers which would have resulted in fares being too high for consumers as a consequence of the market dominant position of the three. Air France-KLM, Delta and Alitalia have now agreed to relinquish some of their slots on New York-Rome and New York-Amsterdam available. In addition to surrendering slots they have agreed that other carriers can sell seats on its JV services, as well as seats on connecting services which any of the three of them operate from these destinations.
Routes to New York are subject to the joint venture. ©iStock/chapelhilltar
And as if access to inventory were not enough, the three carriers have also agreed to align their loyalty programmes on these routes so that passengers who book these seats through other airlines receive rewards.
As the agreement is similar to the commitments which the Commission has already made in 2010 with oneworld and 2013 with the Star Alliance respectively, it is expected to receive final approval after a month in which interested parties can submit objectives. It will be binding for 10 years.
Joint ventures always carry the potential for love-hate relationships between corporates and airlines. On the one hand, dealing with one entity simplifies negotiations and contracting. Moreover, the expanded route network that comes with this level of cooperation means more capacity for that agreement and better choice of schedule for business travellers. On the other side is the spectre that fewer bodies with whom to negotiate and contract can mean less variation in prices.