Italy’s competition authority announced on Thursday the initiation of a comprehensive fact-finding investigation into the utilization of pricing algorithms in passenger air transport, with a specific focus on routes connecting the Italian mainland to the island regions of Sicily and Sardinia.
The decision to launch the inquiry was prompted by the detection of elevated prices during periods of peak demand for passenger air transport in 2022, following the resurgence in travel demand. The antitrust authority issued a statement, stating that the investigation aims to explore the potential adverse effects of pricing algorithms on market functionality and consumer supply conditions. Additionally, it will scrutinize how airline ticket prices and their various components are communicated to the public.
The move comes in the wake of the Italian government, led by Premier Giorgia Meloni, reconsidering controversial regulations regarding airfares on specific domestic routes. The adjustments were made within the framework of the ‘Asset’ decree, which eliminated the previous price cap of 200% of the average fare. The amended decree grants the Italian competition authority expanded powers to investigate potential abuses, particularly on routes to Sicily and Sardinia, given their unique transportation needs.
“The conduct exercised by airlines on routes to the islands during peak seasonal demand, with prices exceeding 200% above the average fare, are circumstances and indications that the Authority can take into account,” states the technical report accompanying the government’s amendment to the decree, presented during the parliamentary process of conversion into law.
The airline industry, particularly represented by the trade body Airlines for Europe (A4E), had strongly opposed the initial price cap. Arguments were presented to the European Commission, asserting that it could set a precedent leading to a domino effect and infringe on companies’ rights to compete freely, set prices, and define services according to their discretion.
Ryanair CEO Eddie Wilson criticized the measure as “ridiculous, illegal, and interfering with the free market, according to European law.” As a direct response, the airline announced an eight percent reduction in its services to and from the Italian island region of Sardinia for the upcoming winter season.
The unfolding investigation is expected to shed light on the intricacies of pricing algorithms in the airline industry and their potential impact on market dynamics and consumer welfare. The outcome may have broader implications not only for Italy but also for how pricing strategies are scrutinized and regulated within the European aviation sector.