Airline competition

A branch of the German Ministry of Transport, Building and Urban Development has forced Dubai-based airline Emirates to raise its ticket prices on flights from Frankfurt to Johannesburg, and from Hamburg and Berlin to Singapore.

Other airlines from outside the European Union are affected by the action, but ministry spokesman Ingo Strater did not say which ones. Emirates has complained about the action and claims to have brought its case to the European Commission in Brussels.

German air traffic law does not allow airlines based outside the EU to offer flights destined for non-EU countries at lower prices than their European competitors. Neither does European law. The action was a result of random spot checking of prices, according to Strater.

"EU airspace is liberalized, but that doesn't apply to non-EU airlines," he said.

One function of the Ministry of Transport, Building and Urban Development is to ensure there are no "market disturbances" or "lasting impairments" to the interests of public transportation.

Strater said public transportation interests are served by the existence of an undisturbed market in which German or EU airlines can compete.

Emirates' fares were seen as a market disturbance because they included stopovers in third countries not mentioned in existing bilateral agreements and undercut fares for direct flights.

Lufthansa may profit from decision

Cologne-based airline Lufthansa offers flights along the same routes and stands to profit from the fare increases at Emirates.

While Emirates has complained it has lost business because it was forced to raise its fares, Lufthansa spokeswoman Stefanie Stotz said there are no current statistics available showing Lufthansa has gained business as a result of the action.

"This regulation is nothing new," Stotz said. "It exists, and it is up to the ministry to check the prices. What can I say? Lufthansa has nothing to do with that."

Emirates Vice President Andrew Parker told Reuters the order to raise prices is a massive intervention in the free-market economy.

"This is singular," he said. "No other developed country has ever pursued this type of politics."

But Fabio Pirotta, spokesman for transportation at the European Commission in Brussels, said he was unaware of a complaint. He did not want to speculate about the matter.

"A lot of people say they sent a letter before we actually receive it," he said.

Regulations not new

While the global market for passenger airlines has become increasingly deregulated, many countries maintain rights to price sovereignty for domestic carriers. Legal structures to do so remain in place in Germany.

Elmar Giemulla, a professor of air-traffic laws at the Technical University of Berlin, said such laws protect consumers.

"It can't be that airlines come into our market at dumping prices and falsify competition instead of invigorating it," he said.

Asger Schubert, deputy director of the Frankfurt-based Board of Airline Representatives in Germany, said the Ministry of Transport, Building and Urban Development followed legal conventions in dealing with Emirates.

"It can't be ruled out that one carrier or another maybe didn't pay very close attention to the regulations, or didn't take them too seriously," he said. "In this instance, a random spot check was done and Emirates was told 'no, you can't do that.'"

The misunderstanding may have arisen because other European countries do not conduct random spot checking of prices.

Emirates' offices were closed on Friday and a spokesperson could not be reached.

Author: Gerhard Schneibel

Editor: Kate Bowen