Business cooperation and new guidance note in the aviation industry – Antitrust, EU competition

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The Competition and Consumer Commission of Singapore (“CSCC“) has granted conditional approval to a commercial cooperation project between Singapore Airlines Limited (“AIS“) and Malaysia Airlines Berhad (“MAB“) for the recovery phase after the COVID-19 pandemic subject to a set of commitments offered within the framework of the cooperation.

The cooperation includes coordination of network planning and scheduling, pricing and inventory management and distribution, joint sales and marketing, revenue sharing and cooperation in other areas, including agreements prorated specials and extensive code sharing. The aim is to develop traffic between Malaysia and Singapore and certain agreed markets such as Europe.

Due to uncertainty about the timing and extent of the aviation industry’s demand recovery post-COVID-19, the SIA and MAB have been limited in their ability to substantiate claims of economic benefits. net. The CCCS also noted that it was limited in its ability to assess the impact on competition due to the limited information available. The CCCS agreed to a set of commitments proposed by the SIA and MAB, including further consideration of cooperation upon the occurrence of certain trigger events that signal a sustained recovery and subsequent sustained normalcy of aviation activity on certain roads. They found that these provided sufficient safeguards to ensure that the cooperation is only implemented during the recovery phase after the COVID-19 pandemic.

Guidance Note for Airline Alliance Agreements

As the aviation industry recovers from the effects of the Covid-19 pandemic amid an increase in tourism and air travel, there is an emergence of enhanced commercial cooperation between airlines as they are repositioning and recalibrating to meet increased demand. In view of these developments, the CCCS recently issued a Guidance Note on Commercial Collaborations in December 2021 and published the CCCS Guidance Note for Airline Alliance Agreements (“The guidance note“).

CCCS noted the importance of the aviation industry to the economy of Singapore and countries in the region, and the relevance of competition assessment for open skies agreements. The guidance note has been issued to better assist airlines in reviewing their CCCS notifications to determine whether their agreements violate the Section 34 prohibition against anti-competitive agreements and whether the agreements benefit from the exclusion of benefits net economic under section 35, read together with paragraph 9 of the Third Schedule of the Competition Act of Singapore.

The guidance note details relevant details to assist airlines, such as when airlines should file notification, availability of pre-notification discussions with CCCS, basic information to be provided (such as overlapping routes and market share information), proposed potential commitments, CCCS processes for review, availability of a streamlined process including a two-phase assessment, with a decision or guidelines issued in seven months, or upon completion of the Phase 1 review within 30 days for straightforward cases that clearly do not raise competition concerns. The Guidance Note also helpfully outlines some common issues encountered by CCS and the merging parties in the assessment.

For example, some factors airlines should consider when deciding whether to notify or narrow the scope of a notification to CCCS include:

  1. whether the parties have overlapping routes;

  2. market shares as an indicator of the closeness of competition (with cumulative market shares not exceeding 20% ​​on one of the routes concerned as a general threshold); and

  3. passenger volumes to determine the impact on competition.

The guidance note also outlines common issues and substantive issues that would arise in a notification, such as route-by-route approach to market definition, treatment of differentiated goods/services, counterfactual analysis, Assessment of Metal Neutral Agreements, Assessment of Benefits for Singapore Aviation Hub and Assessment of Benefits for Singapore Passengers.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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