The European Commission has opened an in-depth investigation to assess, under the EU Merger Regulation, the proposed acquisition of joint control of ITA Airways by Deutsche Lufthansa AG and the Italian Ministry of Economy and Finance (‘MEF').
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The Commission has preliminary concerns that the transaction may reduce competition in the market for passenger air transport services on several short-haul and long-haul routes in and out of Italy.
Lufthansa and ITA operate an extensive network of domestic routes, short-haul routes within the European Economic Area (‘EEA') as well as long-haul routes between the EEA and the rest of the world.
Lufthansa also has a joint venture with United Airlines and Air Canada, through which they coordinate on price, capacity and scheduling and share revenues on transatlantic routes.
The preliminary investigation indicates that the transaction may reduce competition in the market for passenger air transport services on several short-haul and long-haul routes.
Lufthansa and ITA are strong and close competitors in the provision of passenger air transport services on certain routes to and from Italy.
In particular, the Commission found that:
• The transaction may reduce competition on short-haul routes connecting Italy with countries in Central Europe. 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.
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.
• In relation to long-haul routes between Italy and North America, the Commission will assess further whether the activities of ITA, Lufthansa and its joint venture partners United Airlines and Air Canada should be treated as those of a single entity after the merger.
• The transaction could reduce competition on certain several long-haul routes between Italy and the US, Canada, Japan and India, due to close competition between ITA, Lufthansa or Lufthansa's joint venture partners – through non-stop or convenient one-stop connections and convenient airport locations – and due to potentially limited competition from other airlines with attractive connections.
• The transaction could create or strengthen ITA's dominant position at the airport Milan-Linate, which could make it harder for rivals to provide passenger air transport services from and to Milan-Linate.
• 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. ■