antitrustitalia Bruxelles, 29 Avril 2016 Competition in the Aviation Sector

Aviation strategy Make EU leading player Tackle limits to growth Maintain high EU standards Progress on innovation 2

Airline Co-operation LOW HIGH Limited cooperation on specific routes Expanded cooperation to develop joint network (Alliances) Merger Interlining FFP & Lounge Access Code sharing Direct coordination (incl. prices, routes, scheduling, facilities, etc) Revenue, cost & benefit sharing Joint ventures Antitrust Merger Control

Aid to airports Aid to airlines Structural dialogue STATE AID issues 2015

Aid to Airports FRAMEWORK: EU Guidelines on State Aid to airports and airlines (2014) Operating Aid: Phasing out Investment Aid: For smaller airports Case law CHALLENGES: Compliance by MS with the Guidelines for aid to airports Court Cases No duplication of unprofitable airports or creation of unused capacity

Aid to Airlines FRAMEWORK: EU Guidelines on State Aid to airports and airlines (April 2014) Market Economy Operator Principle Case law (Charleroi) CHALLENGES: Aid to low cost carriers through complex arrangements with regional airports likely to continue Proliferation of court cases Aid to flag carriers which are in trouble may gain momentum Possible future pressure to relax State aid rules for airlines (Global competition)

ANTITRUST issues Remedy implementation Codeshare cases Airport charges Online distribution

Merger control

Approach - 23 mergers examined since 2004, 16 of which were between EU carriers - 3 prohibitions - Theory of harm: most decisions focused on the elimination of the only or most important actual or potential competitor on a given O&D pair. - Evidence used: broad assortment of tools - questionnaires to competitors, business customers, TA, airport managers and authorities, consumer associations, etc. - quantitative analyses may be undertaken - Internal documents (monitoring, etc.) - customer surveys ? 10

11 Market definition O&D approach / airport substitutability (City pairs? Airport pairs?) –Although the hub-and-spoke system has gained traction among full service carriers, the O&D approach has repeatedly been confirmed by the Commission's market investigations Distinction between groups of passengers (time sensitive/premium v. non time sensitive/non-premium) –this distinction has become somewhat blurred – case-specific approach... Inter modal competition (train, ferry, etc.) Non-stop vs. one-stop flights Other issues (Impact of charter airlines ? Etc.)

Competitive assessment - Counterfactual? Treatment of alliances, JV? - Market shares (pax, frequencies, etc.), concentration levels - Closeness of competition (business models, service offerings, etc.) - Barriers to entry (airport congestion, etc.) - Entry - Base competition issues? - Potential competition issues? - Efficiencies? 12

Remedies Slot release - Parties commit to make available slots to allow a prospective entrant to operate on an airport-pair (O&D pair) where competition concerns have been identified. At congested airports, slots often have a high value and can be traded among airlines. Feed traffic (Special Pro-rate Agreement) - In particular for long-haul flights, traffic made up by pax connecting at either one or both ends of the route. Such feeder traffic may constitute an important input for a competitor. Parties offer a SPA Commitment, which will allow other carriers to offer competitive fares for indirect journeys. Other remedies (Fare combinability, FFP, etc.) Organisational issues (MT, Fast-Track Dispute Resolution Procedure, etc.) 13

14 Ryanair / Aer Lingus III (COMP/M.6663)

15 The Ryanair Trilogy 2007 : first Commission prohibition decision. Upheld by the EU the General Court : Ryanair initiated a second takeover bid, but withdrew its offer : Ryanair announced its intention to acquire Aer Lingus. Prohibition.

16 The 2013 Prohibition Creation of a monopoly / dominant position on 46 routes ex-Ireland. Removal of the vibrant competition between 2 Irish strong airlines. Harm to more than 11 million of yearly passengers. No suitable/sufficient remedies.

MERGER CONTROL 2015: IAG/Aer Lingus 17

18 Dublin–London (4 million passengers per year) LHR LGWLCY STN LTN Commitments: 2–4 slots at London Gatwick (out of 5 slots)

Feeder traffic 19

The European Commission supports consolidation in the sector so long as it does not happen at the expense of consumers. Conclusion