Summary
- EC’s preliminary report expressed concerns concerning the Lufthansa-ITA Airways merger.
- The Commission has investigated potential limited competition on several markets.
- Each Lufthansa and the Italian Ministry of Economy and Finance can still provide potential remedies to the EC.
The European Commission (EC) has told Lufthansa and the Italian Ministry of Economy and Finance (Ministero dell’Economia e delle Finanze, MEF) that it objects to the merger between Lufthansa Group and ITA Airways. The EC’s preliminary view into the acquisition concluded that the merger would restrict competition on certain routes out and in of Italy.
Wide-ranging investigation into the Lufthansa and ITA Airways merger
The EC said that it had launched an in-depth investigation into the initial merger agreement in January 2024, exploring whether the potential merger would restrict competition on flights out and in of Italy.
Since then, the Commission has investigated the potential impact of the merger, including an evaluation of internal documents, detailed information provided by the involved parties, and knowledge and views from competing airlines, airports, slot coordinators, and travelers.
Photo: ITA Airways
The preliminary report into the Lufthansa – ITA Airways merger concluded that competition can be reduced on several short-haul flights between Italy and Central Europe, where Lufthansa and ITA Airways either compete or would compete with direct or indirect flights. Moreover, competition seemed limited, as noted by the EC, since low-cost carriers like Ryanair connect the identical two city pairs from more distant airports.
In a press release to Easy Flying, Lufthansa Group said that it was making progress with the acquisition of ITA Airways, adding that it should analyze the conclusions presented by the Commission and work with the EC constructively.
The Germany-based company added that it might submit remedies to the EC with the intention to address any remaining concerns, because it keeps working toward a timely approval of the transaction. Lufthansa emphasized it believed that competition in Europe can be strengthened once ITA Airways joined the Lufthansa Group.
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The problem was delivered to light after two different parties submitted formal complaints to the Italian antitrust regulator.
Further competition concerns
Moreover, the EC expressed concerns about competition on long-haul flights between Italy and the US, Canada, and Japan. In accordance with the Commission, ITA Airways and Lufthansa, in addition to its three way partnership partners, either compete or would directly compete on routes where competition is insufficient from other carriers.
To notice, Lufthansa, along with being a part of the Lufthansa Group, can be a part of Star Alliance, which unites United Airlines, Air Canada, All Nippon Airways (ANA), in addition to other airlines, providing services to/from Italy. ITA Airways is currently not related to any of the three alliances. Lastly, the EC expressed concerns about competition at Milan Linate Airport (LIN) for the reason that merger would only strengthen ITA Airways’ position on the airport. Consequently, rival airlines would struggle to offer flights from/to LIN.
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Putting forth remedies
Still, the EC has only provided a ‘Statement of Objections’ to the parties, informing them about potential competition concerns. Moreover, the Commission emphasized that the statement doesn’t prejudge the end result of a full investigation. As well as. Lufthansa and the MEF can put forth potential remedies to handle any competition concerns expressed by the EC, with a deadline of April 26, 2024.
Photo: Bradley Caslin I Shutterstock
Nevertheless, a Lufthansa Group representative noted that the Group wouldn’t be commenting on confidential proceedings or on the ‘Statement of Objections’ provided by the EC. Still, the spokesperson stated that the group was willing to constructively work with the regulator and find solutions which are compatible with the present economic situation of a highly competitive Italian market, emphasizing that the group was confident that ITA Airways would develop into a part of the Lufthansa Group by the tip of 2024.
Lufthansa Group announced that it might be merging with ITA Airways in May 2023, with the previous initially acquiring a 41% stake within the latter. The shares can be acquired with a capital increase of €325 million ($352 million), and Lufthansa would have the choice to buy a 100% stake in the corporate at a later date.
Photo: Fraport AG
When the EC approved the Korean Air and Asiana Airlines merger, the Commission said that the brand new entity would need to dump all of Asiana Airlines’ cargo assets, including aircraft and business contracts, in addition to welcome latest entrants into the EU-South Korea passenger markets.
A day after the EC announced that it had opened an investigation into the Lufthansa and ITA Airways merger, the regulator said it was also looking into the International Airlines Group (IAG) acquiring the remaining shares of Spain-based Air Europa. Nevertheless, the EC has not filed a ‘Statement of Objections’ for that transaction.
Why The European Commission Is Investigating Lufthansa’s ITA Purchase
The European Commission will provide its verdict on 6 June 2023 after the completion of an in-depth investigation.