OPINION TO AMEND THE GOVERNMENT AGREEMENT WITH ALITALIA TO ENHANCE COMPETITION (Advisory opinion)
PRESS RELEASE
PRESS RELEASE
Opinion regarding an amendment to the Convention between the government and Alitalia
On 2 July 1999, the Competition Authority resolved to issue an opinion to the Minister of Transport and Navigation under section 22 of the Competition Act drawing attention to a number of privileges that have been granted to Alitalia by certain provisions of the supplementary agreement dated 31/3/1999 amending the 1992 Convention between the government and Alitalia regulating scheduled air services between Italy and countries outside the European Union.
This opinion followed a similar one submitted on 11 January this year, drawing attention to the discrimination and distortion to competition created by the Convention.
In this latest opinion, the Authority firstly requested the government to designate more than one national airline to be included in bilateral agreements between governments, and to hasten the entry into force of the open sky agreement with the United States. The Authority pointed out that by enabling Alitalia to fly the franchised routes via intermediate points in Italy, and hence to operate from two national airports for one and the same flight, this supplementary agreement modifying the Convention de facto introduced an exclusive right to Alitalia over other routes which it did not service itself directly. In other words, the airline could use the same flight code and one intermediate domestic airport (for example the Rome/Hong Kong flight via Milan) simultaneously covering two non-EU routes, and thereby be given exclusive rights over both. This advantage granted to Alitalia would prevent other national airlines from providing direct flights, and risk reducing the supply of direct point-to-point flights, to the detriment of consumers.
This supplementary agreement also gave Alitalia the right to service routes under franchise under code-sharing agreements with other airlines. In the opinion of the Authority, this right could eventually eliminate competition together. For since the bilateral agreements that exist between governments generally bar new competing market entrants, the code-sharing agreements between Alitalia and the sole foreign carrier present on that particular route could convert the duopoly into a monopoly, with the risk of reducing the capacity on offer and of pushing up prices.
In the view of the Authority, the possibility offered to Alitalia to acquire the franchise for one particular route, even though it serviced it through an intermediate airport operating the second part of the route under a code-sharing agreement with a foreign airline, both restricted competition and discriminated against the Italian airlines operating in competition against Alitalia because they could only service the same route by a direct point-to-point, and hence more costly, flight.
Lastly, the Authority emphasized the fact that by enabling other national airlines to increase their operations and consolidate their commercial presence, increased competition to provide flights to countries outside the European union could have positive effects on competition for all intra-Community and domestic routes.
Rome, 8 July 1999