European regulators cite some short-haul routes to central Europe, long-haul routes to North America and Japan, and ITA Airways’ strong position at Milan Linate airport as key areas that could restrict competition if Lufthansa completes a deal to acquire a stake in the Italian carrier.
The statement of objections comes after the European Commission two months ago opened an in-depth probe into the planned deal, after judging that proposed remedies did not do enough to address potential competition concerns.
Lufthansa Group is seeking to acquire an initial 41% stake in the state-owned Alitalia successor carrier.
The Commission has informed Lufthansa and ITA’s owner, the Italian finance ministry, of its preliminary view that the proposed acquisition of joint control of the Italian airline may restrict competition on certain routes in and out of Italy.
Specifically it flags a certain number of short-haul routes connecting Italy with countries in Central Europe where the two carriers will compete. ”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,” the Commission argues.
It also flags concerns on routes from Italy to the USA, Canada and Japan, where Lufthansa is part of a joint venture agreements with Star Alliance partners, and where it will compete with ITA. The Commission says it considers ITA, Lufthansa and its joint ventures as a single entity post-merger in its considerations and, as such, finds competition from other airlines ”appears insufficient on those routes”.
The Commission also suggests the merger could create or strengthen ITA’s existing position as the slot-constrained Milan Linate airport.
”ITA has had a successful start to its operations. The Commission is concerned that, absent suitable remedies, the removal of ITA as an independent airline may have negative effects on competition in these already concentrated markets,” it says.
”The routes giving rise to potential concerns represent a small share of total short- and long-haul routes and passengers served by both parties and their joint venture partners, and the potential concerns do not affect the vast majority of routes that ITA operates.”
Lufthansa and the finance ministry have the opportunity to respond to the Commission’s statement of objections and to submit further remedies to address the preliminary competition concerns identified by the Commission.
