The European Commission has informed Deutsche Lufthansa AG and the Italian Ministry of Economy and Finance (‘MEF') of its preliminary view that their proposed acquisition of joint control of ITA Airways may restrict competition on certain routes in the market for passenger air transport services in and out of Italy.
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The Commission is concerned that customers may face increased prices or decreased quality of services after the transaction.
Lufthansa and ITA operate an extensive network of routes from their respective hubs in Austria, Belgium, Germany, Switzerland and Italy.
Lufthansa has joint ventures with United Airlines and Air Canada for transatlantic routes as well as with All Nippon Airways for routes to Japan. The joint venture partners coordinate on price, capacity, scheduling, and share revenues.
On 23 January 2024 the Commission opened an in-depth investigation to assess if Lufthansa's acquisition of a stake in ITA may restrict competition in the provision of passenger air transport services in and out of Italy.
The Commission has conducted a wide-ranging investigation to understand the potential impact of the deal.
This investigation has 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.
The Commission has also considered proactive submissions from individual consumers, consumer representative organisations, airports, rival airlines and trade unions expressing their views in support of or against the transaction.
As a result of this in-depth investigation, 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 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.
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. ■