Select Committee on European Communities Thirty-Second Report

PART 1 SUMMARY OF THE COMMITTEE'S RECOMMENDATIONS

Competition in the airline industry

  1.    Airline competition should provide a good deal for the consumer. The aim of the Competition Rules governing the airline industry in the European Community, as in other industries, should be to offer the consumer lower prices, a better quality of service and greater choice. The airline industry is constantly evolving and we are concerned that the way in which it operates does not and will not achieve these goals (paragraph 103).

  2.    The continuance of any immunity or block exemptions from the competition rules should be strictly justified in the interests of consumers and the promotion of competition (paragraph 104).

  3.    Introducing normal competitive conditions should be the clear objective for further regulation and development of the airline industry (paragraph 105).

  4.    We consider that the present system of airline regulation predominantly at the Member State level should not continue (paragraph 109). Responsibility for regulation of airline competition should lie at the highest practical international level. In the case of these proposals, this means the European Commission (paragraph 106).

  5.    The Commission could apply the Competition Rules more efficiently and consistently than Member States have done to date (paragraph 108).

  6.    We do not accept that the Commission would use competition policy as more of a political tool than Member State governments do. A political and commercial agreement on what should be contained in the block exemptions should minimise the ability of the Commission to exploit competition policy from a political motive (paragraph 110).

  7.    The proposed Regulations could achieve a greater degree of transparency in the application of competition policy to airlines (paragraph 108).

  8.    The airline industry should, in the long run, be treated as any other industry in terms of the Competition Rules (paragraph 111).

  9.    While we acknowledge the logic of the argument put forward for an independent European competition authority, we do not consider either that it is necessary or that it would be practical (paragraph 112).

Winners and losers

  10.    We note concern that liberalising airline services with third countries might lead to a highly concentrated industry but we believe that, with strict application of competition policy (in terms of controlling cartel activities, dominant positions, mergers and state aids), this can be avoided (paragraph 114).

  11.    Airline carriers in the United Kingdom would be well placed to cope with increased competition under the proposals given the advanced state of deregulation of the industry in this country and may do well in the longer term (paragraph 115).

The needs of the consumer

  12.    The needs of the consumer should be paramount. Competition between airlines should ultimately be for the benefit of the consumer in terms of price and quality of service, and in this respect, the maintenance of "national" airlines is irrelevant (paragraph 116).

  13.    We recognise that in certain circumstances, for instance where there was no competitive interest in serving a certain route, it would be necessary for essential services to be maintained by government subsidy. Consumers across the European Union could benefit from competition rules being applied at the European Union level (paragraph 116).

Barriers to competition

  14.    Action should be taken at the Community level to ensure that airlines are able to compete in a normal competitive environment free from ownership restrictions, thereby making code-sharing alliances less prevalent in the long term (paragraph 117).

Slots

  15.    In our view, the current system of slot allocation, based on the retention of grandfather rights, is clearly anti-competitive (paragraph 120).

  16.    We believe that there is now a pressing need for a new Slot Regulation which radically alters the rules governing the allocation of slots at Community airports (paragraph 123). This is fundamental to ensuring a competitive airline industry, both in the European Community and worldwide (paragraph 118). The question of slot ownership should be clarified (paragraph 119).

  17.    The system of grandfather rights is now increasingly anomalous and anti-competitive and this system combined with the flexibility afforded to airlines to switch slots between routes provides incumbent airlines with too powerful a tool against its current and potential competitors (paragraph 122).

  18.    We urge the Commission to use its existing powers to suppress anti-competitive practices and abuses of dominant positions by airlines at Community airports (paragraph 120).

  19.    We urge the Government to consider allocating a number of slots at major airports to maintain regional air services (paragraph 121).

  20.    No airline should be allowed to dominate slots at any particular airport to the extent that they have unfair and anti-competitive access. The promotion of competition between airlines should be the aim of any new system of slot allocation (paragraph 126). The objective in the long run should be an open and competitive slot allocation system (paragraph 128).

  21.    Linking slots to routes is a positive step towards regulating airline behaviour and one that could be extended to enhance competition (paragraph 127).

  22.    The new European Community Slot Regulation should set clear and effective criteria for the allocation of slots and that promotion of competition and the public interest should be the most important elements (paragraph 129).

  23.    Whilst we recognise that there may be legal complexities to overcome, ultimately we believe that slots at each Member State's airports should be treated as national assets of that Member State. Airlines should bid for the use of slots within criteria set by the European Community (paragraph 129).

Bilateral air services agreements

  24.    The true negative effects on competition within the European Community come from distorted competition between the European Community and other large airline markets, notably the United States (paragraph 131).

Should airlines be treated differently?

  25.    Airlines have been afforded special treatment in the European Community's competition policy for historical reasons. We believe that these reasons are just that—historic. While we fully recognise the importance of safety standards and controls in the airline industry we believe that these should not inhibit the creation of a more competitive airline industry worldwide (paragraph 132).

  26.    Member States' governments are as culpable, if not more so, than the Commission for playing politics with airlines. Because the Commission would have to balance the competitive needs of airlines from all 15 Member States in its decision-making. It should not, therefore, have a relationship with any particular airline (paragraph 133).

  27.    The real issue affecting airline competition worldwide is the continuing existence of ownership and control restrictions, particularly in the European Community and the United States (paragraph 134). Removing these ownership and control restrictions is a vital step towards achieving a truly competitive global airline industry (paragraph 135).

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