Monopoly game in the sky

Article published on April 22, 2008
Article published on April 22, 2008
I sometimes feel like Europe is playing a huge monopoly game. Everybody wants to buy out everybody. It seems like industrial businessmen haven’t quite understood the meaning of European economical integration. Hey guys, “Single market” doesn’t mean that one should create European monopolies everywhere, so let’s calm down!

Well, the latest example is the abortive buy out transaction of Alitalia by Air France-KLM. We can remember that French and Dutch historical air operators merged in 2004. So, this is the Italian’s turn now. Crawling under functioning costs, on the verge of suspension of payment, Alitalia really needed a company fixer. It was also time to grow a little more.

Unfortunately for Air France-KLM and especially for Alitalia, the plan fizzled out mostly because of the Union opposition, which according Italian law must give their agreement for any changes of owner of Alitalia that remains half nationalised. Union demands, especially in terms of employment, were inadmissible for the buyer which has just announced its withdrawal. The issue hasn’t yet been solved for an Italian only solution, Alitalia recovery seems difficult to imagine today.

But the big question, which is bothering you all, I’m sure about that, is: why such a big appetite? Why buying a loss-making company, close to bankruptcy? Getting stuck with an Italian historical company barely alive, with on top of it Unions everywhere, shows some keenness! This is not enough to proclaim “I want to grow big”, a few empires collapsed for less than that…

The thing is we’re talking about air transportation. And air transportation is like energy, rails and phone, it works network-like. And if al of a sudden no one can reach the network, everyone is dead. Just imagine Air France saying all of a sudden: sorry about that but right now I can’t bring you to Naples since there are no more Rome-Naples timetables available…. Complicated, isn’t it?

Although, when one buys an air company, one buy something very precious named “slots”, i.e. landing and takes off timetables. And when a firm is well set up in an airport and has organised its network towards a national territory with a lot of “slots”, regular flights, it is called a hub. The Alitalia hub is located in Rome Fumicinio. And when a company has Rome-Fumiciano, it can organized its traffic toward all Italians airports. 

So, I’m summing it up: Air France + KLM = Roissy Charles de Gaulle + Amsterdam + Rome Fumicinio. It represents a huge part of the European territory? And then one can organize its connections using the three firms, no more worries! When I told you that it looked like a Monopoly game! Talking about Monopoly, do you remember, there’s always someone buying all the train stations and making big bucks effortlessly and without even buying a hotel. That is the same situation (only with airplanes)!

In the end, if Air France-KLM was ready to take the risk to buy Alitalia out, it means that the access to the network is really a big deal. Proof is that Air France doesn’t give up on the case and taking a glance at… Iberia, the Spanish air company! So, instead of letting create European monopolies with all the misuses that could be caused, it may be time to rethink the famous “slot” system that still depends on EU members. Clearer access procedures could calm the national keenness down…

Alexis Brunelle

Translated by Johara Boukabous