Go: Fares Complaint against Lufthansa

– in the House of Lords at 2:38 pm on 13th March 2000.

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Photo of Lord Brabazon of Tara Lord Brabazon of Tara Crossbench 2:38 pm, 13th March 2000

asked Her Majesty's Government:

What action they intend to take to support the British airline Go in its complaint to the European Commission of alleged anti-competitive behaviour by Lufthansa on the London-Munich route.

Photo of Lord Macdonald of Tradeston Lord Macdonald of Tradeston Minister of State, Department for Transport, Minister of State (Transport), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions)

My Lords, competition between airlines brings real benefits for passengers in terms of value for money and improved choice. UK airlines have a good record in competing energetically and fairly, and we expect all airlines in Europe also to compete fairly. We have not yet received details of this particular complaint from the European Commission. The Commission is required to carry out its investigations in close and constant liaison with member states and we would expect to be consulted by the Commission in due course. We will ensure that Go's legitimate interests are protected. It would be a great pity if, in the meantime, passengers on the London to Munich route ended up paying higher fares.

Photo of Lord Brabazon of Tara Lord Brabazon of Tara Crossbench

My Lords, I am grateful to the Minister for that reply. The allegation is that since Go started trading on this route, Lufthansa has systematically tracked its fares. When Go announced its departure from the route, Lufthansa raised its fare from £59 to £129. However, when Go filed a complaint with the Commission, the Lufthansa fare mysteriously reduced again from £129 to £55. However, is not the real worry that this case could take up to two years to be settled by the Commission? For that reason, will the Government press the Commission to try to deal with the matter more quickly? It is to the long-term disbenefit of both passengers and potential competitors in the airline industry if such complaints take as long as two years to be sorted out.

Photo of Lord Macdonald of Tradeston Lord Macdonald of Tradeston Minister of State, Department for Transport, Minister of State (Transport), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions)

My Lords, I share the concerns expressed by the noble Lord, Lord Brabazon. The complaint was made only on 28th February. As I understand it, the case has yet to be assigned a case officer within the Commission. The first step will be for the Commission to determine whether it is in the interests of the Community for the case to be pursued. Should such an investigation be initiated, it will be conducted in liaison with other member states. It is likely to be several weeks before any papers reach us. However, I agree with the noble Lord that investigations by the Commission can take an unduly long time. If necessary, we will use our best efforts to press the Commission to proceed quickly.

Photo of Lord Clinton-Davis Lord Clinton-Davis Labour

My Lords, what are the best efforts that the Government are able to make in this regard? Is it not a scandal that Go should be penalised for a period as long as two years? I apologise for not being able to articulate more clearly, but I suffered a stroke on 3rd December. I do not want Go to have a stroke in the interim.

Photo of Lord Macdonald of Tradeston Lord Macdonald of Tradeston Minister of State, Department for Transport, Minister of State (Transport), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions)

My Lords, I am sure that I speak on behalf of the whole House when I say how pleased we all are to see my noble friend Lord Clinton-Davis back in his seat. I am always daunted by having him sitting at my back, staunch friend though he is, because his knowledge is so much greater than mine in these areas.

It is true that the Commission's investigations can be lengthy. It does have powers to take interim measures against anti-competitive practices where there is clear prima facie evidence of such behaviour. We shall certainly work with Go and do everything we can to ensure that British interests are protected.

Photo of Lord Elton Lord Elton Conservative

My Lords, as regards the noble Lord's anxiety to curtail the duration of these proceedings, is it not the case that if someone in the United Kingdom notices that someone else is about to undertake an illegal or anti-competitive practice there is recourse to an injunction that has immediate effect and can be proceeded with quickly? Is there an equivalent procedure available within the Community? If not, should not that situation be remedied?

Photo of Lord Macdonald of Tradeston Lord Macdonald of Tradeston Minister of State, Department for Transport, Minister of State (Transport), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions)

My Lords, we understand that the Commission has advised Go that it is unlikely that it could take interim measures as predatory pricing is a very difficult allegation to prove. However, noble Lords can be assured that we shall certainly investigate every avenue of recourse for British interests.

Photo of Lord Bruce of Donington Lord Bruce of Donington Labour

My Lords, is my noble friend aware that the British public will not take lightly any suggestion that the Commission can deal with this affair, in so far as it affects Great Britain, at its own convenience? The fact that we have raised a complaint in the matter should be sufficient to ensure that it is attended to immediately, and the Commission should be told so!

Photo of Baroness Thomas of Walliswood Baroness Thomas of Walliswood Liberal Democrat

My Lords, a single and deregulated market in air traffic in the EU is obviously of benefit to passengers, but we need a much more effective watchdog in such a market. Is it possible for the Government to do more than merely support Go and actually try to ensure that these procedures are made more rapid?

Photo of Lord Clarke of Hampstead Lord Clarke of Hampstead Labour

My Lords, does my noble friend agree that the liberalisation of European aviation has produced real benefits for consumers? Does he also agree that the routes where the fares tend to be higher are those on which there is no competition? Does my noble friend further agree that any study of fare structures would show that the routes from London are favourable when compared to those of our competitors?

Photo of Lord Macdonald of Tradeston Lord Macdonald of Tradeston Minister of State, Department for Transport, Minister of State (Transport), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions)

My Lords, liberalisation of the European aviation market has brought great benefits to consumers. Where competition has developed--and here I pay tribute to the noble Lord, Lord Brabazon, for his efforts in such matters while in office--it has often led to substantial price reductions, increased choice and better value for money. In fact, a recent study by the CAA showed that the lowest fully flexible fares from London were among the lowest in Europe.

Photo of Lord Pearson of Rannoch Lord Pearson of Rannoch Conservative

My Lords, will the Minister be good enough to answer the main thrust of the courageous, witty and accurate question from his noble friend Lord Clinton-Davis; namely, what is there that the British Government can actually do about this matter under the present regulation, apart from making rather pathetic "noises off" as far as concerns the Commission?

Photo of The Bishop of Hereford The Bishop of Hereford Bishop

My Lords, can the Minister tell us whether the problem on the London to Munich route is an isolated incident, or are other UK low-cost airlines threatened in the same way on other routes? Alternatively, does he think that it is likely that such airlines may be so threatened?

Photo of Lord Macdonald of Tradeston Lord Macdonald of Tradeston Minister of State, Department for Transport, Minister of State (Transport), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions)

My Lords, I am sure that we have a very robust civil aviation sector in Britain that, in many cases, is better prepared than others on the continent to defend its commercial interests. That is simply because of the commercial acumen that the sector has acquired through being in a more competitive situation. However, there have been incidents in the past where pressures have arisen that we believed might raise some concerns. We shall certainly be vigilant on behalf of Go and the other British airlines.

British Airways, for example, faces much greater competition on its domestic hubs than Lufthansa might do. BA has about 40 per cent of the slots at Heathrow and Gatwick airports, as against Lufthansa's 60 per cent at Frankfurt and Munich. It is worth noting that the Star alliance in which Lufthansa is involved has still not been investigated by the Commission, although the attempts of BA to set up alliances have been.