TAP and Brussels Airlines in potential breach of EU antitrust rules

The European commission has advised Belgium’s Brussels Airlines and TAP Portugal that their codeshare agreement on flights between Brussels and Lisbon have been operated in a manner that restricts competition and therefore breaches EU antitrust rules.
According to the EU commissioner at the head of competition policy, Margrethe Vestager, “Code-sharing by airlines can bring benefits for passengers in terms of wider network coverage and better connections. However, we are concerned that in this particular case Brussels Airlines and TAP Portugal may have used their codeshare to restrict competition and harm passengers’ interests on the Brussels to Lisbon route.”
The Statement of Objections, which has been submitted to the Commission, raises concerns over the 2009 codeshare agreement between TAP and Brussels Airlines. The objections relate to the first three years of the agreement. Originally these were the only two airlines operating on this route and this was on a competitive basis. Subsequent to the codeshare agreement, both carriers granted rights to each other to sell an unlimited number of seats on each other’s flights in most classes – business, economy – on the route between Lisbon and Brussels.
The Commission’s principal concern is that this codeshare agreement followed an anti-competitive strategy as the carriers had:
1. Discussed a capacity reduction together with aligning their pricing policies.
2. Granted each other rights to sell seats on a codeshare agreement whereas previously, they had operated in direct competition.
3. Implemented both the above arrangements through physically reducing capacity (number of available seats) and completely aligning fair structures as well as ticket prices on the Lisbon – Brussels route.
The Commission has concluded that under Article 101 of the Treaty on the Functioning of the EU, these practices breach EU rules as the action of the two carriers eliminated any competition on prices and capacity, which led to higher prices and reduced choice for customers.