BA objects to order not to undercut Alitalia

The European Commission is looking into a complaint that the Italian government ordered European airlines not to undercut the fares of its ailing state-controlled carrier Alitalia.

The Commission said it had written to all EU member-states to gather evidence and establish whether it needed to take action at EU level following the complaint from British Airways, although it was not certain Italy had a case to answer.

The EU executive earlier confirmed it had received a complaint from British Airways.

Commission spokesman Mr Frederic Vincent said BA had complained in July about an Italian request to lift prices on the Rome-New York route.

German airline Lufthansa has also said it was in talks with Italian authorities after being told to increase fares to match those of Alitalia. But the German airline said it has not complained to the European Commission and hoped to resolve the issue through the talks in Rome.

The British government also said it had been in contact with the Italian government over the issue.

But the Italian aviation agency Enac said it was fully within its rights to prevent foreign companies from undercutting Alitalia prices on certain routes.

"The Enac authority ordered them to raise their tariffs, and this step was taken in agreement with the EU," agency chairman Mr Vito Riggio said.

However, it was not immediately clear which agreement could allow Enac to impose price restrictions on companies or whether the decision was sanctioned by the European Union.

Intra-EU flights are regulated by EU internal markets legislation, but this is not the case for routes that go beyond the bloc's territories, which are governed by bilateral treaties between EU members and third-party countries.

Rome guaranteed a €400 million emergency loan to Alitalia last month, the third time it has had to rescue Alitalia since 1997. The airline lost nearly €2 million a day in the first half of this year and direct competitors, such as BA, oppose further state aid, saying it distorts competition.