ALITALIA/VOLARE
PRESS RELEASE
PRESS RELEASE
ALITALIA/VOLARE: THE COMPETITION AUTHORITY PROHIBITS AN AGREEMENT ON NINE DOMESTIC ROUTES
At its meeting on 10 July 2003, the Competition Authority resolved to prohibit the commercial codesharing agreement between the Alitalia Linee Aree Italiane S.p.A. and Volare Group S.p.A. companies, communicated by the companies pursuant to the Competition Act in relation to 9 of the total of 14 domestic routes and 8 European routes to which the agreement between the companies referred.
The codesharing agreement routes which, in the opinion of the Authority, were infringements of competition legislation are: Fiumicino-Catania Fiumicino-Palermo, Fiumicino-Venice, Fiumicino-Bari, Linate-Naples, Malpensa-Naples, Linate-Catania, Linate-Bari and Linate-Palermo. This agreement, which was concluded between the largest and the fourth largest national airlines, became effective on 1 July 2002, involved codesharing on 14 domestic and 8 European scheduled routes serviced by Alitalia and Volare, and the inclusion of Volare into the Alitalia "MilleMiglia" frequent fliers' programme.
In the 2002 summer season and the 2002-2003 winter season this agreement was applied to all the domestic and international routes serviced by Volare. In that period Volare therefore ceased to operate independently on any domestic or European route.
For the international routes, competition exists between numerous airlines of high standing, and market access conditions do not indicate any substantial entry barriers. On the eight international routes, the agreement does not therefore introduce any kind of restriction according to the findings of the inquiry. Conversely, the codesharing agreement for domestic routes applies to a situation where there is very little competition and major market entry barriers. In particular, the 14 domestic routes involved (Fiumicino-Catania, Fiumicino-Palermo, Fiumicino-Venice, Fiumicino-Bari, Linate-Palermo, Linate-Bari, Linate-Brindisi, Linate-Catania, Linate-Naples, Malpensa-Naples, Malpensa-indices, Catania-Venice, Palermo-Venice, Naples-Palermo) account for about 28 percent of all domestic flights in terms both of seat capacity and the numbers of passengers carried. Because of the strength the airline can exert when it is operates the individual flight (such as controlling available aircraft capacity and setting fare policy) the particular type of codesharing agreement concluded between Alitalia and Volare substantially reduces competition between the two airlines.
Moreover, this agreement - and particularly the joint drawing-up of their operational programmes (flight plans operated under the codesharing agreement) - Alitalia and Volare repositioned themselves on certain routes, thereby creating a strategic market-sharing agreement between them on the domestic markets concerned.
The agreement also enabled Alitalia and Volare to more effectively control the routes into and out of Linate airport, where both airlines continue to operate: on the routes using Linate airport the agreement has created restrictions on competition, also in terms of the airport slot congestion, giving Alitalia and Volare almost twice as many slots as all the other competitors put together, and three times more than any other individual airline. The agreement between Alitalia and Volare has therefore raised entry barriers against competitors on routes governed by the codesharing agreement into and out of Linate.
The codesharing agreement has created an overall restriction on competition between Alitalia and Volare on all the domestic routes in question.
However, the Authority accepted the request to authorise a waiver submitted by the parties under section 4 of the Competition Act, for five routes - Catania-Venice, Palermo-Venice, Linate-Brindisi, Malpensa-Brindisi and Naples-Palermo - because of the improved conditions of the supply and the fact that the benefits have been passed on to consumers.
With regard to the routes Fiumicino-Catania, Fiumicino-Palermo, Fiumicino-Venice, Fiumicino-Bari, Linate-Naples, Malpensa-Naples, Linate-Catania, Linate-Bari and Linate-Palermo, the Authority prohibited the agreement from continuing because the investigation had shown that major restrictions on competition had been created under the agreement, and no conditions existed to authorise a waiver, since there was no evidence that the conditions of supply had improved or that the benefits had been passed on to consumers.
Rome, 26 July 2003