Lufthansa-ITA Acquisition -Brussels to Decide by June

The European Commission is concerned that the proposed partial acquisition of ITA Airways by Lufthansa Group will reduce competition on short-haul routes in Europe and on long-haul routes, particularily to North America. That is why the EC has launched an in-depth investigation before it will rule on the proposal, Brussels said on Tuesday. Lufthansa and the Italian government agreed last May that the German airline group would acquire a 41 percent stake in ITA Airways for €325 million. This can be expanded to a full takeover at a later stage. Lufthansa, ITA, the Italian government, and the European Commission discussed for months what should be included in the official notification to get approval from the EC. The notification was filed on November 30 and allowed Brussels until January 15 to approve the acquisition of launch an in-depth study. A week before the deadline, Lufthansa submitted commitments to the EC to address some of the preliminary concerns of the commission, but these were deemed insufficient. Hence, the EC has opted for a deeper look at the various concerns. It has until June 6 to decide on the acquisition plan. Competition to Central Europe Brussels is concerned that under the wings of Lufthansa-ITA Airways, competition on short-haul routes between Italy and Central Europe will be reduced. “On certain such routes, Lufthansa and ITA compete head-to-head with non-stop connections with only limited competition, primarily from low-cost carriers, such as Ryanair, who in many cases operate from more remote airports,” the EC says in a media statement. It doesn’t mention that Ryanair has a 40 percent share in the Italian market. Wizz Air also has a strong position in Italy and connects the country to its Central Eastern European network. “Moreover, the Commission will also examine routes where one of the parties is already offering services and the other is expected to enter soon, and those where one or both of the parties has a convenient one-stop connection and where non-stop connections are limited or only offered by the other party.” Long-haul concerns The commission is also concerned with competition on long-haul routes between Italy and the US, Canada, Japan, and India. ITA Airways will swap its current membership of the SkyTeam Alliance for Lufthansa’s Star Alliance. Through Lufthansa, it will also have access to the existing Transatlantic partnership between the German carrier, United Airlines, and Air Canada. The commission wants to investigate if this joint venture must be treated like a single entity once ITA has become part of Lufthansa Group. Just today, ITA Airways launched a marketing campaign to promote the new Rome-Chicago rotation that will start on April 7. On Thursday, the codeshare with All Nippon Airways between Rome and Tokyo Haneda will become effective. Another concern for the EC is the strong position of ITA Airways and Lufthansa at Milan Linate Airport. This was already raised during the pre-notification phase, with the surrender of slots by both carriers seen as one of the potential remedies that Brussels would demand. It doesn’t say this option is already certain, but the EC wants to have a good look at how dominant the combination will be. “The Commission will also examine possible negative effects on routes on which other airlines rely on access to ITA's domestic and short-haul network for their own operations, which could affect their services to international destinations also served by Lufthansa,” the Commission says. The Italian Ministry of Finance and Economic Affairs and Lufthansa tell Corriere della Sera that they will proceed with the acquisition plan and will cooperate closely with the Commission to address all concerns. Lufthansa CEO Carsten Spohr has said on various occasions that adding ITA Airways to the group will not only benefit Lufthansa Group but also the Italian airline market. In his view, Italy is overly dominated by low cost and lacks a strong home carrier. He only needs to convince Brussels of this.

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