Royal Ministry of Labour and Government Administration

DG Competition - D2 Hubert Beuve-Méry 70 Rue Joseph II Brussels 1040 Belgium

Your reference Our reference Date 200403476 CER 7 September 2004

CONCERNING THE REVISION AND POSSIBLE PROROGATION OF COMMISSION REGULATION 1617/93

Dear Sir,

The Norwegian competition authorities refer to DG Competition’s Consultation Paper concerning the revision and possible prorogation of Commission Regulation (EEC) No 1617/93 on the application of Article 81(3) to certain categories of agreements and concerted practices concerning consultations on passenger tariffs on scheduled air services and slot allocation at airports.

The Norwegian competition authorities strongly support the Commission’s thorough and critical revision of Regulation 1617/93. While recognizing that the tariff consultations may lead to efficiency gains, the authorities are also of the opinion that they may restrict competition. A revision that may lead to a less restrictive system is therefore required.

The Norwegian competition authorities believe that one of the major benefits of the interlining system is the flexibility of the system, which allows the passenger to choose from all participating operating the route in question, when using a fully flexible ticket. However, due to the growing importance and scope of alliances within the EEA, this has probably changed. The alliances allow consumers to choose from a high number of routes without having to buy an interline ticket. The overall consumer benefit that may be specifically attributed to the IATA interlining system in the EEA may therefore be said to have decreased in a corresponding proportion to the increase in size and importance of airline alliances.

The Norwegian competition authorities furthermore believe that the prices agreed through the IATA Passenger Tariff Conferences are likely to influence not only the price of interlining

Postal address Office address Telephone Competition Policy Department Case handler PO Box 8004 Dep Akersg. 59 +47 22 24 90 90 Telefax Christina Erichsen N-0030 Oslo Oslo Vat no. +47 22 24 27 23 +47 22 24 08 67 972 417 785 tickets but also the fare levels on airline and alliance unique tickets.

As regards the IATA interlining system on the fare of a multiple sector journey involving more than one airline/alliance, the Norwegian competition authorities are uncertain of the claimed benefits. The IATA fare is the sum of the sector fares reduced by a discount. According to IATA, the fares without the interlining system would be the sum of the sector fares without the discount. However, it is rather difficult to know what sector fares would apply in the markets without the tariff conferences. Prices established in markets by collaboration among the providers will generally be higher than prices established independently by the same providers as part of their internal competition.

The IATA tariff consultation system is claimed to be important for smaller airlines by allowing access to network economies for airlines not large enough to operate substantial networks on their own. The IATA interlining system results in more flexibility by allowing the passenger to choose from more departures on a given route. If, however, the larger airline has a substantial or much larger proportion of the departures on the route in question compared to a smaller one, the passenger is less likely to buy a substantially more expensive IATA ticket than an alliance unique ticket. This claimed benefit might thus not be as significant as IATA claims.

The interlining system may be of importance with regard to the substantial network of Public Service Obligation (PSO) air services in . Widerøe, a fully owned subsidiary of SAS Braathens, the dominant carrier in the deregulated Norwegian market, operates the majority of this network. In a situation without tariff consultations, SAS Braathens and Widerøe would still be able to provide passengers with the possibility to purchase a “through fare” and to “through check” their baggage, while the other carriers on the Norwegian market would not be able to do so. It is however unclear how significant this problem would be. So far the Norwegian low-cost carrier, , which operates routes in competition with SAS Braathens, has not been interested in participating in interlining. In addition, it is probably safe to assume that the alliance unique ticket issued by SAS Braathens/Widerøe would, at any time, be cheaper than any fully flexible IATA-ticket.

The Norwegian Royal Ministry of Transport and Communications is responsible for the Norwegian PSO-routes in accordance with Regulation 2408/92. The Ministry has pointed out that it is important for smaller airlines competing for PSO-contracts on regional routes to have the opportunity to connect through interlining with the larger

Page 2 airlines on the main route networks, in the same way as Widerøe has through its relationship with SAS Braathens.

Yours sincerely,

Jan A. Halvorsen Director General Christina Erichsen Adviser

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