EU competition law: Recent developments in aviation

The General Court of the EU dismissed the annulment actions that Niki Luftfahrt GmbH, an Austrian air carrier had brought against the European Commission (EC) decisions that approved the takeover of the Austrian legacy carrier Austrian Airlines by the German carrier Lufthansa.

A few days later, the EC accepted the commitments offered by SkyTeam members Air France/KLM, Alitalia and Delta on three transatlantic routes.

In addition and in a more general framework, the EC initiated an infringement procedure on the application of the German Minimum Wage law to the transport sector.

I. General Court confirms EC decisions on Austrian Airlines takeover

In 2008 the Austrian State sold its majority share of 41,56% in Austrian Airlines, which was in great financial difficulty, to the German air carrier Lufthansa for € 366.278,75 €. In addition, Lufthansa offered a debtor warrant (Besserungsschein) for an extra payment of up to € 162 million, in case the finances of Austrian improved by 31 December 2011. Furthermore, the Austrian State undertook to provide Austrian the amount of € 500 million through a Special Purpose Vehicle (SPV) to improve its financial condition. Lufthansa acquired also the remaining floating shares of Austrian, thus increasing its share to 85%.

The EC cleared the acquisition of Austrian by Lufthansa upon certain conditions (commitments) concerning the routes Vienna-Stuttgart, Vienna-Cologne/Bonn, Vienna-Munich, Vienna-Frankfurt, Vienna-Brussels. Moreover, the EC approved the State aid received by Austrian, on the grounds that it had been included as a negative financial element in the price offered by Lufthansa.

Niki Luftfahrt sought to have the above decisions of the EC annulled before the General Court of the EU.

In its judgment on the case T-511/09 (not yet available in EN), the Court found that the State aid offered to Austrian was a lawful restructuring aid aimed at improving the long-term viability of the airline, which had been included in the negative purchase price paid by Lufthansa.

At the same time, in its judgment on the case T-162/10 (not yet available in EN), the Court found that the EC did not err about the commitments it asked and the routes such commitments regarded.

Therefore, the Court rejected the claims of Niki Luftfahrt.

II. European Commission accepts commitments by SkyTeam members Air France/KLM, Alitalia and Delta on three transatlantic routes

In 2009 and 2010, Air France/KLM, Alitalia and Delta – members of the SkyTeam airline alliance - established a transatlantic joint venture (JV). The EC had concerns that the enhanced cooperation provided for in the agreements, which included  profit-sharing, as well as joint management of schedules, pricing and capacity, could affect consumer interests  on the Paris-New York route (for premium passengers), as well as Amsterdam-New York and Rome-New York routes (for premium and non-premium passengers). In addition, the JV market power could prevent an effective competition with other airlines, which could lead to an artificial rise of prices.

To address these concerns, the SkyTeam members jointly offered a set of commitments, the final form of which is to:

-      make available landing and take-off slots at Amsterdam, Rome and/or New York airports on the Amsterdam-New York and Rome-New York routes;

-      enable other airlines to offer tickets on the parties’ flights on the three routes ("fare combinability agreements");

-      facilitate access to the parties' connecting traffic on the three routes ("special prorate agreements");

-      provide access to their frequent flyer programs on all three routes;

-      allow passengers of competitors who have no equivalent frequent flyer programme to accrue and redeem miles on the parties' frequent flyer programmes; and

-      submit data concerning their cooperation, which will facilitate an evaluation of the alliance's impact on the markets over time.

The Commission was satisfied with the above commitments and has made them legally binding on the three carriers, pursuant to Art. 9 of Regulation (EC) 1/2003 (EU Anti-Trust Regulation).

III. European Commission launches an infringement procedure on the application of the German Minimum Wage law to the transport sector.

The EC has sent a Letter of Formal Notice to Germany, which is the first step in the infringement procedure, i.e. procedure relating a possible violation of the EU Treaties, concerning some provisions of the German law on minimum wage (Mindestlohngesetz).

The law, which entered into force on 1 Jan. 2015, foresees a minimum hourly wage of € 8,50. The law applies also to companies outside of Germany which provide services in Germany. Companies outside Germany in certain sectors, including transport, have to notify the German customs authorities via specific forms. The German customs authorities have the right to control the execution of such notifications and impose penalties for their breach that can reach € 500.000, if the remuneration paid does not comply with the German law.

The EC thinks that the application of German measures to transit and certain international transport operations creates disproportionate administrative barriers, which hinder fair competition and the free movement of services and goods within the EU internal market.