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Airline alliances - A legal way of restricting competition?

Hermansson, Ida LU (2016) LAGM01 20161
Department of Law
Abstract (Swedish)
Konkurrensbegränsande avtal är förbjudna under Europeiska Unionens konkurrensrättsliga regleringar. Art. 101 i EUF-fördraget förbjuder alla avtal vars syfte är att begränsa konkurrensen inom den inre marknaden. Flygbolagsindustrin är kännetecknad av en stor mängd samarbetsavtal mellan flygbolag, där särskilda avtal innebär integrerade samarbeten. Det huvudsakliga syftet med dessa avtal är att begränsa konkurrensen, oavsett vilken nivå flygbolagen har valt att samarbete på. Flygbolagsallianser skapas för att kunna stå emot flygbolagsindustrins tuffa förhållanden. Industrin är känd för dess höga fasta kostnader och låga vinstmarginal, genom allianser finns det en möjlighet för flygbolag att minska deras utgifter samtidigt som de fortfarande... (More)
Konkurrensbegränsande avtal är förbjudna under Europeiska Unionens konkurrensrättsliga regleringar. Art. 101 i EUF-fördraget förbjuder alla avtal vars syfte är att begränsa konkurrensen inom den inre marknaden. Flygbolagsindustrin är kännetecknad av en stor mängd samarbetsavtal mellan flygbolag, där särskilda avtal innebär integrerade samarbeten. Det huvudsakliga syftet med dessa avtal är att begränsa konkurrensen, oavsett vilken nivå flygbolagen har valt att samarbete på. Flygbolagsallianser skapas för att kunna stå emot flygbolagsindustrins tuffa förhållanden. Industrin är känd för dess höga fasta kostnader och låga vinstmarginal, genom allianser finns det en möjlighet för flygbolag att minska deras utgifter samtidigt som de fortfarande kan erbjuda sina kunder möjligheten att flyga över hela världen.

Sedan liberaliseringen av flygbolagsindustrin har Kommissionen granskat flygbolagsalliansers förenlighet med konkurrensrätten. Kommissionen har ansett att de konkurrensfrämjande effekter som flygbolagsallianser leder till har vägt tyngre än eventuella konkurrensbegränsande effekter. Kommissionen har godkänt alla flygbolagsallianser dock med tillägg om åtaganden för att minska de konkurrensbegränsande effekterna. Dessa åtaganden har däremot inte alltid gett de effekter som Kommissionen har strävat efter då monopol har skapats på vissa marknader. Vidare har Kommissionen godkänt allianser genom att förplikta alliansen att ingå i ytterligare samarbetsavtal med andra konkurrenter.

Konkurrens inom flygbolagsindustrin är inte tillräckligt bibehållen, anledningen till detta kan vara ett försök att bevara flygbolagsindustrin. Om flygbolagsallianser hade förbjudits är det tveksamt om industrin hade kunnat bevara samma nivå av tjänster som den gör idag. Genom att ta större hänsyn till alliansers konkurrensfrämjande effekter bevaras industrin. Det är troligt att de konkurrensbegränsande effekterna på marknaden hade varit större om alla allianser hade förbjudits, än de konkurrensbegränsande effekter som uppstår till följd av en begränsad konkurrens. Flygbolagsallianser kan därmed anses vara lagliga konkurrensbegränsande avtal. (Less)
Abstract
Competition law within the European Union prohibits any agreements that restrict competition. When an agreement has as its object to eliminate competition such an agreement will be considered as an infringement of Art. 101 TFEU. The airline industry consists of various cooperation agreements between airlines, some of these agreements create highly integrated joint ventures and the main object of all of these agreements is to restrict competition on key parameters of competition. Alliances have been created in order to meet the internal and external pressure within the airline industry, which is characterized by its high fixed costs and thin profit margins. By entering into an alliance there is a possibility for an airline to reduce its... (More)
Competition law within the European Union prohibits any agreements that restrict competition. When an agreement has as its object to eliminate competition such an agreement will be considered as an infringement of Art. 101 TFEU. The airline industry consists of various cooperation agreements between airlines, some of these agreements create highly integrated joint ventures and the main object of all of these agreements is to restrict competition on key parameters of competition. Alliances have been created in order to meet the internal and external pressure within the airline industry, which is characterized by its high fixed costs and thin profit margins. By entering into an alliance there is a possibility for an airline to reduce its costs while still being able to provide world-wide services.

The Commission has assessed these airline alliances since the European airline industry was liberalized in the 1990s. Although there are obvious anti-competitive effects caused by airline alliances the Commission has deemed that the efficiencies created brings benefits that outweighs the disadvantages. Although the Commission has approved all alliances, this has not been done without imposing commitments on the airlines first. However, these commitments have not always led to the wanted effects as some markets have become monopolistic following the approval by the Commission. Further it seems as if the Commission has approved various cooperation agreements by imposing commitments that have consisted of further cooperation agreements with other competitors.

It would seem as if competition within the airline industry is not sufficiently maintained. However, this may be a way of fostering the airline industry. If airline alliances were to be considered as illegal, regardless of whether commitments were offered by the airlines, it is questionable if the industry would be able to stay at the level of operations as it is today. By taking a more lenient approach and emphasising the benefits created through alliances the Commission has kept the industry alive. If all cooperation were to be prohibited within the industry the negative effects would most likely be greater than what the elimination of competition causes when airline alliances are allowed. Airline alliances are therefore, to a certain extent, a legal way of restricting competition. (Less)
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author
Hermansson, Ida LU
supervisor
organization
course
LAGM01 20161
year
type
H3 - Professional qualifications (4 Years - )
subject
language
English
id
8874985
date added to LUP
2016-07-11 10:32:52
date last changed
2016-07-11 10:32:52
@misc{8874985,
  abstract     = {Competition law within the European Union prohibits any agreements that restrict competition. When an agreement has as its object to eliminate competition such an agreement will be considered as an infringement of Art. 101 TFEU. The airline industry consists of various cooperation agreements between airlines, some of these agreements create highly integrated joint ventures and the main object of all of these agreements is to restrict competition on key parameters of competition. Alliances have been created in order to meet the internal and external pressure within the airline industry, which is characterized by its high fixed costs and thin profit margins. By entering into an alliance there is a possibility for an airline to reduce its costs while still being able to provide world-wide services. 

The Commission has assessed these airline alliances since the European airline industry was liberalized in the 1990s. Although there are obvious anti-competitive effects caused by airline alliances the Commission has deemed that the efficiencies created brings benefits that outweighs the disadvantages. Although the Commission has approved all alliances, this has not been done without imposing commitments on the airlines first. However, these commitments have not always led to the wanted effects as some markets have become monopolistic following the approval by the Commission. Further it seems as if the Commission has approved various cooperation agreements by imposing commitments that have consisted of further cooperation agreements with other competitors.

It would seem as if competition within the airline industry is not sufficiently maintained. However, this may be a way of fostering the airline industry. If airline alliances were to be considered as illegal, regardless of whether commitments were offered by the airlines, it is questionable if the industry would be able to stay at the level of operations as it is today. By taking a more lenient approach and emphasising the benefits created through alliances the Commission has kept the industry alive. If all cooperation were to be prohibited within the industry the negative effects would most likely be greater than what the elimination of competition causes when airline alliances are allowed. Airline alliances are therefore, to a certain extent, a legal way of restricting competition.},
  author       = {Hermansson, Ida},
  language     = {eng},
  note         = {Student Paper},
  title        = {Airline alliances - A legal way of restricting competition?},
  year         = {2016},
}