Competition and Regulation in the Airline Industry: Puppets in Chaos

209 Pages·2012·1.02 MB·English

by  Steven Truxal

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Competition and Regulation in the
Airline Industry
Puppets in chaos
Steven Truxal
LAW/ECONOMICS
aninformabusiness
ISBN 978-0-415-67196-5
,!7IA4B5-ghbjgf!
www.routledge.com
Competition and Regulation
in the Airline Industry
An examination of the relationship between competition and the deregulation and
liberalization of the US and European air transport sectors reveals that the structure
of the air transport sector has undergone a number of significant changes. A grow-
ing number of airlines are entering into horizontal and vertical cooperative arrange-
ments and integration including franchising, codeshare agreements, alliances, ‘virtual
mergers’ and in some cases, mergers with other airlines, groups of airlines or other
complementary lines of business such as airports.
This book considers the current legal issues affecting the air transport sector incor-
porating recent developments in the industry, including the end of certain exemp-
tions from EU competition rules, the effect of the EU–US Open Skies Agreement,
the accession of new EU Member States and the Lisbon Treaty. The book explores
the differing European and US regulatory approaches to the changes in the industry
and examines how airlines have remained economically efficient in what is perceived
as a complex and confused regulatory environment. Competition and Regulation in
the Airline Industry will be of particular interest to academics and students of compe-
tition law as well as EU law.
Steven Truxal is Visiting Professor of English Law at Humboldt University, Berlin.
Routledge Research in Competition Law
Available titles in this series include:
The Internationalisation of Competition Rules
Brendan J. Sweeney
Antitrust Federalism in the EU and the US
Firat Cengiz
Competition and Regulation in the Airline Industry
Puppets in chaos
Steven Truxal
Forthcoming titles in this series include:
Merger Control in Post-Communist Countries
EC merger regulation in small market economies
Jurgita Malinauskaite
Merger Control in Europe
The gap in the ECMR and national merger legislations
Ioannis Kokkoris
Competition and
Regulation in the
Airline Industry
Puppets in chaos
Steven Truxal
First published 2012
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
Simultaneously published in the USA and Canada
by Routledge
711 Third Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2012 Steven Truxal
The right of Steven Truxal to be identified as author of this work has
been asserted by him in accordance with sections 77 and 78 of the
Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced
or utilised in any form or by any electronic, mechanical, or other means,
now known or hereafter invented, including photocopying and recording,
or in any information storage or retrieval system, without permission in
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Trademark notice: Product or corporate names may be trademarks or
registered trademarks, and are used only for identification and
explanation without intent to infringe.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloguing in Publication Data
Truxal, Steven.
Competition and regulation in the airline industry : puppets in chaos / Steven Truxal.
p. cm. — (Routledge research in competition law)
ISBN 978–0–415–67196–5 (hardback) — ISBN 978-0-203-11946-4 (e-book) 1. Aeronautics,
Commercial—Law and legislation. 2. Aeronautics, Commercial—Deregulation.
3. Airlines—Deregulation. 4. Airlines—Mergers. 5. Competition, International. I. Title.
K4095.T78 2012
387.7'1—dc23
2011045352
ISBN 978–0–415–67196–5(hbk)
ISBN 978–0–203–11946–4(ebk)
Typeset in Garamond
by Swales & Willis Ltd, Exeter, Devon
Contents
List of tables vi
Table of cases, decisions and legislation vii
Acknowledgements xiii
Abbreviations xiv
1 Introduction 1
2 The evolution of air transport 16
3 Deregulation, liberalization and re-regulation 44
4 American and European competition law and policy 64
5 The development of tactical and strategic alliances: progress
and challenges 119
6 Final thoughts 159
References 167
Index 178
Tables
1.1 Freedoms of the air 11
4.1 Change in state ownership of flag carriers 2002–2010 103
5.1 Alliance network comparison 138
Table of cases, decisions
and legislation
EU case law and Commission decisions
Aer Lingus and Sabena [1989] OJ C204/11.
Air France and Alitalia [1989] OJ C 204/5.
Air France and Brymon [1989] OJ C 204/6.
Air France and Iberia [1989] OJ C 204/4.
Air France and NFD Luftverkehrs AG [1989] OJ C 204/3.
Air France and Sabena [1989] OJ C 204/7, 8 and 10.
Austrian Airlines–Lufthansa [2002] OJ L 242/25, [2003] 4 CMLR 252.
Austrian–Lufthansa [2002] OJ L 242/25, [2003] 4 CMLR 252.
British Airways–Air Liberté Commission Decision of 28 February 1997, Case IV/
M.857.
British Airways–TAT (II) Commission Decision of 26 August 1996, Case IV/M.806.
British Midland v Aer Lingus Commission Decision of 26 Feburary1992, Case IV/
33.544, [1992] OJ L 96, 10 April 1992.
Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission [1983] ECR 3461.
Case 40/73, Suiker Unie v EC Commission [1975] ECR 1663, [1976] 1 CMLR 295.
Case 56/65, Société Technique Minière v Maschinenbau Ulm GmbH [1966] ECR 234, 249,
[1966] 1 CMLR 357.
Case 66/86, Ahmed Saeed Flugreisen and Silver Line Reisebüro GmbH v Zentrale zur Bekämp-
fung unlauteren Wettbewerbs E.V. [1989] ECR 803, [1990] 4 CMLR 102.
Case 85/76, Hoffmann-La Roche v Commission [1979] ECR 461, [1979] 3 CMLR 211.
Case C-38/2010 (ex NN 69/2010 CP 63/2010), Malév Hungarian Airlines, Negative
decision and recovery, 09 January 2012.
Case C-169/08, Presidente del Consiglio dei Ministri v Regione Sardegna [2010] OJ C24/6,
30 January 2010
Case C-244/94, Fédération Française des Sociétés d’Assurance and Others v Ministère de
L’Agriculture et de la Pêche [1995] ECR I-4013, [1996] 4 CMLR 536.
Case C-333/94, Tetra Pak v Commission (Tetra Pak II) [1996] ECR I-5951.
Case C-35/96, Italy v Commission [1998] ECR I-3851, [1998] 5 CMLR 889.
Case C-364/92, SAT Fluggesellschaft v Eurocontrol, [1994] ECR I-43, [1994] 5 CMLR
208.
viii Cases and legislation
Case C-366/10, Air Transport Association of America, American, Continental and United Air-
lines v Secretary of State for Energy and Climate Change (2011), available at <http://curia.
europa.eu>(accessed 5 January 2012).
Case C-415/03, Commission v Hellenic Republic, Judgement of the European Court
(Second Chamber), 12 May 2005.
Case C-6/2009, (ex. N663/2008) – Restructuring of Austrian Airlines AG.
Case C26/2008, (ex. NN31/2008) – Prêt de 300 millions d’euros à ALITALIA (Recov-
ery of 300 million Euros from Alitalia), 12 November 2008.
Case C-466/98, Commission v United Kingdom, [2002] ECR I-9427.
Case C-467/98, Commission v Kingdom of Denmark [2002] ECR 9519.
Case C-468/98, Commission v Kingdom of Sweden [2002] ECR 9575.
Case C-469/98, Commission v Republic of Finland [2002] ECR 9627.
Case C-471/98, Commission v Kingdom of Belgium [2002] ECR 9681.
Case C-472/98, Commission v Grand Duchy of Luxembourg [2002] ECR 9741.
Case C-475/98, Commission v Republic of Austria [2002] ECR 9797.
Case C-476/98, Commission v Federal Republic of Germany [2002] ECR 9855.
Case COMP/38.712, Lufthansa–SAS–BMI British Midland.
Case COMP/C-3/37.792, Microsoft, 24 March 2004
Case C/38/2010, Malév (Official Journal JOCE C/156/2011
Case COMP/39258, Airfreight, Commission Decision of 9 November 2010
(unpublished).
Case COMP/M.5181, Delta Air Lines/Northwest Airlines, Commission Decision of
06 August 2008 declaring a concentration to be compatible with the common
market (Case No COMP/M.5181 – DELTA AIRLINES / NORTHWEST AIR-
LINES) according to Council Regulation (EC) No 139/2004, [2008] OJ C281/3,
05 November 2008.
Case COMP/M.5364, Iberia–Vueling–Clickair (IP 09/29, ‘Mergers: Commission clears
Iberia’s proposed acquisition of Vueling and Clickair, subject to conditions’, 9 Jan-
uary 2009).
Case COMP/M.5403, Lufthansa/BMI, Commission Decision of 14 May 2009
COMP/M.5403 – LUFTHANSA / BMI) according to Council Regulation (EC)
No 139/2004, [2009] OJ C158/1, 11 July 2009
Case COMP/M.5440, Lufthansa/Austrian Airlines, (notified under document C(2009)
6690 final), [2009] OJ C16/11, 22 January 2010.
Case COMP/M.5889, United Air Lines/Continental Airlines, Commission Decision
of 27 July 2010 declaring a concentration to be compatible with the common
market (Case No COMP/M.5889 – UNITED AIR LINES / CONTINEN-
TAL AIRLINES) according to Council Regulation (EC) No 139/2004. Online.
Available at <http://ec.europa.eu/competition/mergers/cases/decisions/m3770_
20050704_20212_en.pdf>(accessed 1 June 2006).
Case T-46/11, Deutsche Lufthansa and Others v Commission (2011/C 80/56).
Case T-48/11, British Airways v Commission (2011/C 80/57).
Case T-62/11, Air France–KLM v Commission (2011/C 95/13).
Case T-67/11, Martinair Holland v Commission (2011/C 95/15).
Cases and legislation ix
Case T-203/01, Manufacture française des pneumatiques Michelin v Commission [2003] ECJ
CELEX LEXIS 489.
Case T-219/99, British Airways Plc v Commission [2003] ECR 242.
Case T-342/07, Ryanair Holdings Plc v European Commission (Ireland, intervening) [2011]
4 CMLR 4.
Case T-342/99, Airtours v Commission; Airtours–First Choice [2000] OJ L 93/1.
Case T-83/91, Tetra Pak International SA v Commission [1994] ECJ CELEX LEXIS
6909.
Cases 48, 49, 51–7/69, ICI v Commission [1972] ECR 619, [1972] CMLR 557.
Cases T-68, 77 and 78/89, Società Italiana Vetro v Commission [1992] ECR 11-1403,
[1992] 5 CMLR 302.
Commission Decision 94/118/EC of 21 December 1993 concerning aid to be pro-
vided by the Irish government to the Aer Lingus group [1994] OJ L 54/30, 25
February 1994.
Commission Decision 94/653/EC concerning the notified capital increase of Air
France, 27 July 1994.
Commission Decision 94/696/EC regarding Olympic Airways and its subsidiaries, 7
October 1994.
Commission Decision 94/698/EC concerning increase in capital, credit guarantees
and tax in favour of TAP Air Portugal, 6 July 1994.
Commission Decision 95/404/EC of 19 July 2005 on a procedure relating to the
application of Council Regulation (EEC) No 2407/92 (Swissair–Sabena), [1995]
OJ L 239/19–28, 7 October 1995.
Commission Decision of 16 January1996, Case IV/25.545 – Lufthansa–SAS [1996] OJ
L 54, 5 March 1996.
Commission Decision of 20 July 1995 concerning Swissair–Sabena Case IV/M.616.
Commission Decision of 7 March 2007 regarding state aid case C 10/06 (ex N555/05) –
Cyprus Airways Public Ltd’s restructuring plan, [2008] OJ L 49/51, 22 February 2008.
Commission Decision of 28 August 2009 declaring a concentration to be compatible
with the common market and the EEA Agreement. Online. Available at <http://
ec.europa.eu/competition/mergers/cases/decisions/m5440_20090828_20600_
en.pdf> (accessed 27 July 2011).
EBU, [1993] OJ L 179/23, [1995] 4 CMLR 177.
Eurostar Case No. IV/M.1305 (19 December 1998).
Film Purchases by German Television Stations [1989] OJ L 284/96, [1990] 4 CMLR 841.
Höfner and Elser v Macrotron, [1991] ECR I-1979, [1993] 4 CMLR 306.
IAZ International Belgium NV v Commission, [1983] ECR 3369, [1984] 3 CMLR 276.
KLM–Air UK Case No. IV/M.967 (22 September 1997).
KLM–Alitalia Commission Decision of 11 August 1999, Case M/JV-19.
London City Airways and Sabena [1989] OJ C 204/12.
Lufthansa–SAS [1996] OJ L 54/28, [1996] 4 CMLR 845, (1998) 19 ECLR 116.
Marine-Wendel–SairGroup–AOM Commission Decision of 3 August 1999, Case
IV/M.1494.
Olympic Airways [2003] OJ L 132/1, Decision 2003/372/EC of 11 December 2002.
Polypropylene, [1986] OJ L 230/1, [1988] 4 CMLR 347.