Virgin Express' unofficial complaint of predatory pricing by SAS has added to the pressure on the European Commission to take action in this area with three cases from small carriers pending.
Virgin is basing its allegations on SAS' decision to cut fares on Copenhagen-Brussels by 52 per cent only on specific flights that compete with Virgin services launched in early September.
Virgin Express chief executive, Jonathan Ornstein, claims SAS aims to force his airline out of the market and then raise its own fares again. Ornstein sees SAS' selective discount fares 'as a blatant case of anti-competitive behaviour, against everything the European Commission stands for.' Virgin is preparing 'aggressive action' in response to SAS's discount fares. 'We will either lower fares, increase frequencies, or both', Ornstein says.
Alfred Merckx of lawyers Sinclair Roche & Temperley predicts that Virgin's voice, added to string of official predatory pricing complaints, may push the Commission into taking action. UK startup carriers EasyJet and World Airlines have added to an earlier complaint by Belgian regional VLM, against KLM, Air UK and CityFlyer Express, respectively. 'We should see a test case soon - predatory pricing is becoming an acute problem,' says Merckx, who suggests the Commission may give priority to scrutinising the proposed British Airways/American Airlines alliance, while smaller carriers are suffering real damage as a result of predatory pricing.
However, Frances Butler-Sloss with Harbottle & Lewis, Virgin's lawyers, says that if the Commission follows past practice, it will deal with all complaints informally, including Virgin's. She believes SAS' actions reflect its lack of exposure to competition. SAS maintains the cuts are a natural competitive response: 'Virgin want competition and they're going to get it'.
Meanwhile, Virgin Express has abandoned attempts to launch a Brussels-Geneva service after the Swiss authorities refused to approve the carrier's discount fares - 50 per cent lower than those currently available. Ornstein views the government's stance as 'ultra-protectionist'. British Midland faced a similar response earlier this year.
Indeed, Virgin Express may have opened a can of worms by applying to fly to Switzerland. The Swiss are questioning Virgin's status as a Belgian carrier due to Richard Branson's 90 per cent holding in the carrier. The distinction is vital, because if designated a UK carrier, Virgin Express could only fly to non-European Union countries, including Switzerland, via the UK.
If the Swiss authorities do not agree to back down, Virgin will ask the Commission to intervene, says Butler-Sloss. But Ornstein adds: 'We'd rather go elsewhere - we've plenty of places to put our airplanes'.
Lois Jones
Source: Airline Business
