October 27, 2020

Competition sees "regulatory failures" in the discount system areos – La Provincia

Competition sees "regulatory failures" in the discount system areos - La Provincia


The recent complaints about the rise in unjustified prices in air fares after the entry into force last July of 75% discount to residents to fly to the Peninsula have intensified the debate on the control of the system of subsidies applied to transport in the extrapeninsular territories -Canarias, Baleare, Ceuta and Melilla-. Various reports prepared by associations of travel agencies and consumers of the Balearic Islands, pointing out that the airlines transfer the new 25% additional subsidy with respect to the previous discount (of 50%) to the prices of the tickets, has set off the alarms and puts in the pillory the system as a whole. This is what they seem to understand both from the Ministry of Development, responsible for implementing these compensations, and from the National Commission of Market and Competition (CNMC), to which the Balearic Government has remitted the studies.

From both departments, each within its scope, control processes have already been initiated to prevent companies from transferring part of the subsidy to the rates and end up appropriating them from the State Budgets.

This is the basis of the complaints transferred from the Government of the Balearic Islands to the Ministry of Public Works and that has also been reported to the CNMC. Although formally the regulatory body has not yet received any formal request to open an investigation or a sanctioning procedure, agency sources acknowledge, nevertheless, that "this situation is being followed with concern". And it is that, de facto, there is a previous warning in relation to the whole system of application of subsidies to the transport in the extra peninsular territories for the suspicions of fraud that have been denounced for years.

Competition perceives a "regulatory failure" due to the lack of controls to ensure that the subsidies are properly applied and fulfill their objective of improving connectivity in the Canary Islands and the mobility of residents without affecting either the competition or the market or the whole non-resident travelers.

Two alerts

The same sources of the CNMC emphasize that the current model does not contain the necessary guarantees to prevent the airlines from ending up "appropriating the subsidies" by means of the formula of transferring the aids to the ticket prices. In fact, the agency has already expressed that alert twice.

The first was in the report prepared in connection with the establishment of a flat rate on inter-island flights in the Balearic Islands, which warned that "the current model of grants to residents[sea en los porcentajes actuales o en porcentajes superiores]apparently they do not prevent an appropriation ofrentvia prices on the part of the aerial operators in front of the real beneficiaries of the aids, the residents ".

The other warning slipped into a report last September commissioned by the Ministry of Development in relation to aid for the transport of goods, which noted that "the CNMC has been insisting on the importance of checking to what extent consumers and customers of the operators are benefiting from the reduction of costs caused by the aid ". This case was insisted on, of generic application in the whole system of subsidies in the extrapeninsular territories, that "in case of stability stability or price increase after having received the subsidy, this could be indicating scenarios where competition could be distorted".

According to the sources consulted, a parallel rise in prices by airlines operating in the same corridor would only be punishable under Article 1 of the Law on the Defense of Competition in the event that the existence of a agreement between them. The Ministry of Public Works has made progress in relation to price control mechanisms for flights to the Peninsula that has contacted the CNMC "to put in place collaboration mechanisms in the detection of behavior contrary to competition regulations".

"It is a complex issue, the situation is being analyzed and we are on it." The effects on the prices of the subsidy increase are something that could not be ruled out and it was even something that was already noticed at the time, not only about the possible transfer of the new percentage of discount to the tickets of the residents, but a generalized rise that affects also to the non-residents ", assure the consulted sources, that bet by a change of the system of helps or a much more clear regulation" to finish with all kinds of picaresque. "

The reports that have provoked the denunciations of the Balearic Government start from the conclusions of a report that shows an increase of 28% of the tickets between August and October, after the extension of the discount to 75%. 4,500 rates were analyzed and the Balearic agencies conclude that in 30% there are increases, corresponding to low cost companies. The report notes that Iberia andAir EuropeThey are the ones that have least raised the tickets and which are thelow costthose that have triggered the prices. It is usual for airlines to force the online buyer to check the resident box when accessing their websites. So from the beginning of the consultation know that who is going to buy the plane ticket is a resident. The Balearic Conseller of Mobility, Marc Pons, considers that this practice "is punishable".

Precisely, to avoid this practice, Fomento is starting to apply a new booking and ticket purchasing system with which the companies will not know if the traveler is a resident or not, and therefore beneficiary of the subsidy, until the end of the process. . That is to say, that the rate offered to the buyer seeking an online ticket can not change from the moment in which he identifies himself as a resident. It is a change in the purchasing protocol that reinforces the control of the process and the prices and that, in theory, will prevent the companies from being able to transfer part of the subsidy to the rates.

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