That Was The Week That Was 01-05 May 2023
A very competitive week
What with a global pandemic and stuff, we have tended not to worry too much about legal niceties like competition law recently. Instead, we have seen the most Nelsonian of blind eyes being turned to any amount of assistance being poured into the aviation sector. And, I hasten to add to any amount of other sectors too. Add to that an era of more expansive ‘light-handed’ regulation and a tendency towards globalisation and it has been a good few years for approving things like State Aid and consolidation, or in the case of Alitalia, now trading as ITA, both at the same time.
It is certainly true that consolidation in the airline industry would seem like a very good idea – the US carriers, once the Chapter 11 champions of the world, are now the most profitable, or at least the four remaining airlines are – and Lufthansa and IAG are both putting together impressive results this first quarter with their model of consolidating as much as possible, within the confines of the antediluvian system we are cursed with. Lufthansa is continuing their consolidation spree with intentions towards ITA. What is the German for Good Luck With That? If that gets further forward and closer to the Italian regulators, go long popcorn.
Notwithstanding this brave play from LH, we seem to be moving away from all that. Nationalism is on the rise, State Aid looks like a Good Thing, as jobs are saved and traditions preserved. Still, bravely the women and men of competition authorities are holding the line, or perhaps refinding the line after having had to hold their noses and approve all sorts of pandemic give-aways. They could see that there was significant reform on the horizon, but we did not let these modern corporate sheriffs ride to ridge where the west commences; we fenced them in. (There is a bonus point if you get that reference.)
It is important to realise that competition law makes illegal behaviour which would otherwise seem very sensible. For competitors to agree on prices, to consolidate, to use its market power seems completely rational to every CEO in the world. It is only the threat of gaol time, or breath-taking fines, that stays their hands. Still, competition authorities fight the good fight, battle the forces of greed and make the world safe for civil aviation.
And this week, the week that was, we saw the brave women and men do exactly that. First, after taking a well-earnt rest from their labour on Labour Day, they started to make some noises. On Wednesday, DG Comp learnt that it would be asked to opine on the takeover bid of SAS by an asset management company Apollo Global Management. SAS is an interesting study, in that the ownership and control issues are already complex, but even if, as seems possible, that most of the world considers Scandinavia to be one country, surely even the geography-challenged can understand that an American company is a stretch.
Thursday DG COMP decided to get on the front foot and announced that it was consulting publicly on whether or not to extend the current support for regional airports. You can guess their view, but they want to know how hard the pushback might be, if they were allowed to be doctrinaire.
On Friday, their colleagues at the Australian Competition and Consumer Commission did get doctrinaire. The ACCC rejected an application by Virgin Australia to take over Alliance Aviation Services, a provider of charter ‘fly-in-fly-out’ services to various mining companies. Virgin is the second largest supplier, Qantas the largest of these services. The ACCC seems to have taken the view that two large competitors is not as good as one large one and two smaller ones, but what would we know? To be fair, they had already rejected an application by Qantas to buy AAS. Maybe any consolidation is going to be harder for a while.