A press release today from the Italian Antitrust Authority (AGCM – Autorità Garante della Concorrenza e del Mercato) concerning an ongoing inquiry into airline pricing algorithms, specifically for routes to and from Sicily and Sardinia. 

The AGCM has initiated discussions with the European Commission to promote greater price transparency and enhance market competition in air travel, particularly given the extensive European regulation of the sector. 

The investigation revealed significant issues with the comparability of airfares and optional services, leading to consumer difficulty in understanding the true cost of tickets. 

The authority emphasises the importance of tools that improve offer comparability, including the cost of optional services like seat selection and baggage, to stimulate demand and encourage price competition among airlines.

The November 2024 report on the use of pricing algorithms in passenger air transport for national routes to and from Sicily and Sardinia analyses market shares, passenger volumes, and market concentration (using HHI indices) for these routes. The report provides detailed quantitative data on market shares and passenger numbers for various airlines and routes, highlighting significant market concentration and the dominance of key operators. Some data are omitted for confidentiality reasons.

The principal conclusions of the report are:

High Market Concentration: Air transport routes to and from Sicily and Sardinia exhibit significant market concentration, with a few airlines holding dominant positions on several routes.

Use of Pricing Algorithms: Airlines employ advanced revenue management systems and pricing algorithms, which can result in price discrimination and dynamic pricing based on demand, booking timing, and other factors.

Transparency Issues: Persistent problems remain with the transparency and comparability of airfares, particularly regarding the breakdown of taxes, fees, and optional services, making it difficult for consumers to compare final prices across airlines.

Regulatory Gaps: Despite EU regulations mandating clear price breakdowns and transparency, airline practices do not always fully comply, and further regulatory oversight may be necessary.

Impact on Consumers: The combination of high market concentration and opaque pricing practices can adversely affect consumer choice and lead to higher prices, especially during peak demand periods.

Need for Policy Intervention: The findings indicate a need for ongoing monitoring and potential policy measures to promote fair competition, price transparency, and consumer protection on these routes.

Carlos Torres