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Ahem, what happened to the single market and free competition?

Posted by Helen Monday, August 09, 2004

We have been told ad nauseam that one of the great advantages of the European Union is that it creates a large area for free competition and, in particular, it made air travel convenient and cheap. This is what lies at the bottom of the Commission’s constant demands that individual member states should tear up their agreements with third parties and submit to Commission negotiations and decisions.

This rosy picture has already been tarnished somewhat by the Ryanair case and the ongoing saga of “illegal” subsidies to flagship airlines. Now comes the interesting development of Alitalia and its competitors.

Alitalia, the struggling, majority state-owned Italian ariline is about to collapse into bankruptcy. Or it would do if the Italian government did not rush to its rescue with a €400 million loan (to be repaid when?). Even before the legality of such a loan could be discussed, Alitalia and Enac, the Italian civil aviation authority have gone beyond that.

They have demanded that British Airways and Lufthansa cease to offer lower air fares than Alitalia on competing long-haul flights. This has not gone down well either with BA or the UK Transport Department, who have flatly refused to comply (for the time being) and demanded that the Commission intervene.

Lufthansa is in negotiations and Enac has threatened legal action if there is no compliance within three days. It is not clear which court the legal action will be in. Nor is it entirely clear that this sort of high-handedness is of any benefit to Italy, many of whose cities rely heavily on tourists for their economic well-being. And tourists, these days, look for the cheapest flights.