Air fares not exempt from competition rules: EU

The European Commission told airlines on Friday they would no longer be exempt from competition rules when setting fares for flights involving more than one carrier between the European Union and other nations.
The EU executive scrapped an exemption that has allowed representatives of International Air Transport Association (IATA) member airlines to meet to agree prices for multi-leg flights on the same ticket, using more than one carrier. Such flights allow passengers to change dates and cancel or alter their itineraries - including changing airlines and destinations - without further costs.
IATA, with some 250 member airlines, is developing a new system to replace the so-called tariff conferences. The Commission had previously withdrawn the so-called "block exemption" for flights within the EU and asked IATA to justify why they should continue outside the 27-nation bloc.
"IATA has not supplied data that would allow the Commission to conclude that an exemption would continue to benefit passengers," it said in a statement on Friday. The system had been exempt from EU antitrust rules since 1993 because the benefit of seamless travel on one ticket was thought to outweigh the risk to competition.
But with code-sharing and global alliances among airlines world-wide now common, EU regulators felt the IATA system offered the potential for price fixing. The exemption expires on June 30 for routes between the EU and the United States or Australia and on October 31 for routes between the EU and other third countries, it said. IATA spokesman Anthony Concil said the decision widens a move already taken in January for flights within Europe.
Instead of airline representatives meeting with immunity to discuss fares, a computerised system called Flex Fares is used to work out what is fair value. "We have been preparing for this for years," he said. The new system will not be covered by a block exemption and "as is the case for other sectors of the economy, it will be for IATA and individual carriers to ensure that their agreements are compatible with the competition rules", the Commission said.
Both IATA and the Commission said the change would not have an impact on consumers' fares. "The reason why we are not renewing the block exemption is precisely because the benefit to consumers does not seem to be there anymore, whereas every time airlines sit down together in a room there is a risk of anti-competitive collusion," Commission spokesman Jonathan Todd said.