EU: Lufthansa – ITA Airways Deal May Harm Competition
Deutsche Lufthansa’s proposed acquisition of a minority stake in Italy’s ITA Airways could restrict competition on certain routes in the market for passenger air transport services in and out of Italy, the European Commission said on Monday.
The announcement follows the Commission’s in-depth investigation on the deal that began on January 23.
The investigation included, among others, analysing internal documents and detailed information provided by the parties and gathering information and views from competing airlines, airports, slot coordinators and customers.
Following the investigation, the Commission said it is concerned that “customers may face increased prices or decreased quality of services after the transaction”.
More specifically, the Commission is concerned that the transaction may:
- Reduce competition on a certain number of short-haul routes connecting Italy with countries in Central Europe. On such routes, Lufthansa and ITA compete or will compete head-to-head mainly with direct, but also with indirect flights. Competition in such routes appears limited and comes primarily from low-cost carriers, such as Ryanair, who in many cases operate from more remote airports.
- Reduce competition on a certain number of long-haul routes between Italy and the US, Canada and Japan. On such routes, ITA on the one hand and Lufthansa and its joint venture partners on the other hand compete head-to-head with direct or indirect flights. Competition from other airlines appears insufficient on those routes. In its assessment, the Commission treats the activities of ITA, Lufthansa and its joint venture partners as those of a single entity after the merger.
- Create or strengthen ITA’s dominant position at the Milan-Linate airport, which could make it harder for rivals to provide passenger air transport services from and to Milan-Linate.
The Commission highlights that every year, “millions of passengers travel on those routes for a total annual spending of over 3 billion euros” and sims to ensure that the transaction would not lead to adverse effects for customers – consumers and businesses alike – in terms of increased prices or decreased quality of services.
The Commission’s Statement of Objections is a formal step in an investigation, where it informs the companies concerned in writing of the objections raised against them. The sending of a Statement of Objections does not prejudge the outcome of the investigation. Lufthansa and the Italian Ministry of Economy and Finance (MEF) now have the opportunity to reply to the Commission’s Statement of Objections, to consult the case file and request an oral hearing.
Lufthansa and MEF also have the possibility to put forward remedies to address the preliminary competition concerns identified by the Commission. They can decide to submit remedies at any time of the proceedings until the remedy deadline, which currently falls on April 26.