The European Commission has approved, 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 approval is conditional upon full compliance with the remedies offered by Lufthansa and the MEF.
This decision follows an in-depth investigation of the proposed transaction, including the sending of a Statement of Objections.
Lufthansa and ITA operate an extensive network of routes from their respective hubs in Austria, Belgium, Germany, Switzerland and Italy.
Their operations are to a significant extent complementary as they operate from different hubs in Central Europe and Italy respectively. Lufthansa has joint ventures with United Airlines and Air Canada for transatlantic routes as well as with All Nippon Airways for routes to Japan.
Whilst ITA is performing well today, ITA's long-term sustainability as a stand-alone carrier would have remained highly uncertain absent the transaction.
To address the Commission's competition concerns, Lufthansa and the MEF submitted a remedy package consisting of:
Commitments for short-haul routes:
Lufthansa and the MEF will make available to one or two rival airlines the necessary assets to enable them to start non-stop flights between Rome or Milan and certain airports in Central Europe. Remedy takers would need to operate on those routes for a certain minimum period.
Lufthansa and the MEF will also ensure that one of those rival airlines will have access to ITA's domestic network to offer indirect connections between certain airports in Central Europe and certain Italian cities other than Rome and Milan.
Commitments for long-haul routes:
The merged company will enter into agreements with rivals to improve their competitiveness on the long-haul routes of concern, for instance through interlining agreements or slot swaps. This will lead to increased frequencies of non-stop flights and/or improved connections for one-stop flights on each of the routes.
In its assessment, the Commission took into account the fact that the MEF will retain a controlling stake in ITA after the transaction and will continue to have incentives to have ITA compete against Lufthansa's joint venture partners in North America, at least until ITA is integrated into the joint venture.
Commitments for Milan Linate airport: Lufthansa and MEF will transfer take-off and landing slots at Linate airport to the remedy takers for the short-haul routes.
The number of slots to be divested exceeds what is necessary to operate the short-haul routes as well as the number of slots that the transaction would have added to ITA's portfolio.
This will allow the remedy taker to establish a sustainable base at Linate airport and to potentially offer its own one-stop connections between Italy and Central Europe.
Pursuant to the commitments, Lufthansa and the MEF can only implement the transaction following the Commission's approval of suitable remedy takers for each of the short-haul, long-haul and Milan Linate commitments.
The Commission will assess the suitability of remedy takers in the context of a separate buyer approval procedure. ■