Margrethe Vestager (Lapresse)
The EU hinders the merger between ITA and Lufthansa. Giuricin speaks, “The rigidity of the EU will not lead to anything good”
“No comment.” It is the concise and direct response of the Vice President of the European Commission, Margrethe Vestager, to the declarations of the Deputy Prime Minister Matteo Salvini, who had defined a possible EU rejection of the merger between ITA and Lufthansa as “a hostile act”.
The entry of the Germans into the Italian company was defined more than 10 months ago, but Brussels still does not give the green light. The question arises spontaneously: why all this tolerance towards Ryanair, a major player in the Italian market, while ITA and Lufthansa are caught in the grip of European rules? Despite attempts by Lufthansa and the MEF to allay concerns with a “broader” package of commitments, Brussels’ competition concerns remain unaddressed. To shed light on this intricate situation, Affaritaliani.it he asked Andrea Giuricin, professor of Transport Economics at the University of Milan Bicocca.
Professor Giuricin, why is the merger between Ita-Lufthansa so advantageous for Italy?
Without a strong industrial partner, Ita-Airways has and will struggle a lot on the market, because it is a very small operator with negative margins. So without a partner like Lufthansa it will hardly be able to resist in a hyper-competitive market like that of air transport. Furthermore, the German company also plans to develop Ita’s Fiumicino hub on intercontinental traffic, especially on North America and in the future (partially) also on Africa, and therefore to strengthen the connection and direct connectivity of Ita and ‘Italy to these destinations.
The merger continues to slide. What are the issues that are hindering the operation?
The European Commission is raising several points on competitiveness, some are understandable, others less so. The first is release slots on Linate: Ita already has 60% and together with Lufthansa it would reach 70%. The second, also quite logical, is on the routes where it is available overlap (for example those to Germany or Belgium), where he was asked to release some slots, and here Ita and Lufthansa agreed.
And lastly there is the point ofintercontinental, that is, it is required to provide intercontinental connectivity, and perhaps connectivity towards Rome-Fiumicino as a hub, for certain intercontinental routes. But even there, as can be seen in the data, it is a very competitive hypercontinental market. Ita is not a big player with a large market share and therefore this last point is quite doubtful and very incomprehensible on the part of the European Commission.
But then why is the EU so ill-disposed towards Italy and lenient towards Ryanair, which continues to hold 49.4% of the Italian domestic airline market?
It is difficult to understand why the Commission is rigid on some points, it is incomprehensible. The Competition Commissioner is a politician and he has many doubts about this merger. We don’t understand why, except maybe this merger may disturb other operators and players on the European market. Which is logical if we consider that Lufthansa would go and get another company to strengthen itself on the market.
So are you afraid of strong competition?
Yes, but if we look at the Italian market, it is the last one that can be considered uncompetitive, because Ita is really weak and needs Lufthansa to strengthen itself. Competition is not at risk. This is why this request regarding the competitiveness of the intercontinental market seems absurd. It is a stalemate that is not good for Italy, nor for the European Commission which, with its rigidity on certain points, will not lead to anything good.
Then obviously there are other companies that are worried about the strengthening of Lufthansa, such as AirFrance or KLM. An understandable fear but denied by the data which confirms that these competitiveness problems do not exist in Italy on the intercontinental line. This is because you can always use indirect flights with stopovers in Amsterdam, Madrid, Frankfurt, etc.
What risks do Lufthansa and Ita Airways run if this merger does not go through?
Lufthansa acquired 40% of Ita, investing around 325 million euros, a modest sum compared to its business. However, if the German company fails to consolidate itself in the Italian market and grow the Fiumicino hub, both Ita and Italy will suffer. Ita, being completely dependent, may not make it in such a competitive market, also putting taxpayers’ public funds at risk. As a result, Italy itself will lose the opportunity to enhance its intercontinental connectivity, a crucial element given our current deficit compared to France and the Netherlands. The Italians, therefore, are at greater risk of suffering the consequenceswhile for Lufthansa the risks seem less imminent.
When will a final decision be reached?
It is also a very political game where even the Commission is playing a political role. The deadline was July 4th, but there will be European elections soon. So it’s difficult to say whether there will be a break immediately or there will be an attempt to prolong it until after the elections. From an economic point of view it is intelligent to move towards a merger, both for Italy and for the operators involved. Beyond political disputes, this alliance must be resolved without resorting to sterile controversies, which benefit no one, but rather reaching an agreement that is advantageous for Italy. Unfortunately there is a political level at the moment that is questioning an operation that certainly makes economic sense.
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