As if the Italians hadn’t got enough to worry about at the moment (what with the latest round of economic data being predictably poor : growth is slowing down, industrial production is falling, consumer confidence is plumbing the depths). Now comes news that the Italian government is heading for conflict with some leading European airlines (and later with the UK and German governments, and then Brussels presumeably). The reason for the problem: their prices are too low, and Alitalia can’t compete.
Italy has ordered leading European airlines, including British Airways and Germany’s Lufthansa, to stop offering lower fares than Alitalia, the struggling majority state-owned Italian flag carrier, on competing long-haul services.The move by the Italian government comes as it seeks to prevent Alitalia collapsing into bankruptcy by agreeing an emergency state-guaranteed ?400m ($493m) loan to the airline.
But it has sparked a fierce protest by BA to the European Commission and has triggered a row with the UK government.
The UK transport department said the Italian government had been told ?in strong terms? that BA should be allowed to continue with its fare offers.
Lufthansa said it was in talks with Italian authorities after it had been told to raise its fares to Alitalia’s levels.
So much for the white heat of structural reform!
Can they actually “order” that with any authority, or is this more Berlusconi spin and grandstanding? I would think it was an EU matter anyway.
Seems silly.
On the other hand, even in the US an airlaine company can’t sell below its own costs to put a competitor out of business. Alitalia will have to prove that BA is doind dumping. Being inefficient is not an excuse.
With Brussels indeed.
From the EUObserver: EU criticises Italy’s protection of Alitalia:
“”Restricting prices is against the spirit of the internal market,” said European Commission spokesman Stefaan de Rynck.
However, there is not much the EU can do about it as Rome’s move appears to be covered by old bilateral treaties.
“There isn?t actually any European basis which allows us to act”, said Mr de Rynck”
and
“The fact that the struggling Italian carrier also got a 399 million euro rescue package – approved by the EU last month – has also irritated other airlines, which feel that it goes against the bloc’s internal market rules.
Italian aviation agency Enac said it was fully within its right to prevent foreign companies from undercutting Alitalia prices on certain routes.
It said that the request was made to 40 airlines, but that only the UK’s BA refused to comply.”