10.05.08
The Office of Fair Trade (OFT) announced yesterday that it is considering whether to accept undertakings from Air France KLM (AFKL) in relation to its acquisition of VLM Airlines. If suitable undertakings are not obtained, the merger will be referred to the Competition Commission.
The OFT has concerns that the takeover will substantially lessen competition in the provision of scheduled flights for business passengers between London City Airport and Amsterdam's Schiphol. However, it has suspended any referral as AFKL has offered to divest a sufficient number of take-off and landing slots between the two airports to another airline.
VLM and AFKL are currently the biggest airlines operating flights between the two airports and, even allowing for entry by BA on the route in May 2008, the parties will remain the principal choices for business travellers requiring peak-time outbound and inbound flights, with a combined share of 70-80% for both seat capacity and number of flights.
The OFT considers that the slot divestment remedy, in principle, appears clear-cut and would restore competition on the route. It will now consider AFKL's undertakings proposal further.
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