Ita-Lufthansa, the EU gives official approval to the merger. The journey can begin
There European Commission approved the proposal to acquire a stake in Ita Airways from Lufthansasubject to certain conditions. Approval is conditional on full compliance with the remedies offered by Lufthansa and the Ministry of Economy and Finance Italian, sole shareholder of the airline. Today’s decision – writes the EU Executive – follows a thorough investigation into the proposed transaction, including the sending of a Statement of Objections. Lufthansa and Ita operate a large network of routes from their respective hubs in Austria, Belgium, Germany, Switzerland and Italy.
Their operations are largely 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 and with All-Nippon Airways for routes to Japan.
While Ita is getting good results today, the sustainability long-term viability as a standalone carrier would have remained highly uncertain in the absence of the transaction. During its in-depth investigation, the Commission collected extensive information and feedback from market participants and other interested parties, including Rival airlines, airports, corporate clients, consumer associations And passengersas well as by individual consumers who have contacted the Commission.
Following its market investigation, the Commission expressed concerns that the transaction, as initially notified, would have: reduced the competition on a number of short-haul routes connecting Italy with Central European countries via direct flights and with one stopover.
On such routes: (i) Lufthansa And Ita compete head to head or would probably soon compete head to head; competition is limited and comes mainly from low-cost carriers, such as Ryanairwhich in many cases operate from more remote airports.
Reduced competition on a limited number of long-haul routes between Italy and the United States and Canada. Since Lufthansa and its joint venture partners United Airlines And Air Canada coordinate on pricing, capacity and scheduling and share revenues, the Commission treats the activities of Ita, Lufthansa and its joint venture partners as those of a single entity when assessing this transaction.
Ita Lufthansa’s joint venture partners compete head-to-head with direct flights on these routes and competition from other airlines is limited. It has created or strengthened Ita’s dominant position at Milan Linate airportwhich could have made it more difficult for rivals to provide passenger air transport services to and from Milan-Linate.
Ita-Lufthansa: EU, open to rival companies and give up slots at Linate
To address the Commission’s competition concerns, Lufthansa and the Mef have presented a package of remedies, the European Commission reports. Commitments for short-haul routes: Lufthansa and the Mef will provide one or two rival airlines with the resources needed to enable them to launch direct flights between Rome or Milan and certain airports in Central Europe.
The beneficiaries of the remedies will have to operate on these routes for a certain minimum period. Lufthansa and MEF will also ensure that one of these rival airlines will have access to Ita’s domestic network to offer indirect connections between certain Central European airports and certain Italian cities other than Rome and Milan.
Commitments for long-haul routes: The merged entity will enter into agreements with rivals to improve their competitiveness on the long-haul routes in question, for example through interlining agreements or slot swaps. This will lead to higher frequencies of direct flights and/or better connections for flights with a stopover on each of the routes.
In his assessment, the Commission took into account the fact that MEF will retain a controlling stake in Ita after the transaction and will continue to have incentives to let Ita compete with Lufthansa’s joint venture partners in North America, at least until Ita will not be integrated into the joint venture.
Commitments for Milan Linate Airport: Lufthansa And MEF will transfer the take-off and landing slots at Linate airport to the beneficiaries of the remedies for short-haul routes.
The number of slots to be divested exceeds what is needed 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 entity adopting the remedy to establish a sustainable base at Linate airport and potentially offer its own one-stop connections between Italy and Central Europe.
Based on commitments, Lufthansa and the MEF may implement the transaction only after the Commission has approved eligible remedy entities for each of the Short-Haul, Long-Haul and Milan Linate commitments. The Commission will assess the eligibility of remedy entities in the context of a separate purchaser approval process.
These commitments fully address the concerns identified by the Commission. Therefore, the Commission has concluded that the transaction, as modified by the commitments, would no longer raise competition concerns. The decision is conditional on full compliance with the commitments. Under the supervision of the Commission, an independent trustee will monitor their implementation.
Giorgetti: “A very successful operation”, “Same logic for Mps”
“This week Italy has become the focus of attention on the financial markets”, first with Tim and now with Lufthansa”. ”Today we are closing positively a historic and long-standing affair, that of the national carrier and then Ita”. ”The positive solution with Lufthansa comforts us and allows us to develop air traffic to and from Italy”. ”Rome will become the reference hub for the USA and Africa”. And it has been a ”troubled and difficult path” but ”crowned with success, great Italian, German and European success”. This was stated by the Minister of Economy, Giancarlo Giorgetti, in the press conference held after the EU gave the green light to the Ita-Lufthansa operation. “If you look at the logic behind the Lufthansa operation, you will find the same logic behind what we want to do with Mps. It is not a desperate operation to find money because we are not desperate, but an operation that we want to do under good conditions for the state and for the economy of this country. The operation will be done when these conditions are there”. This was stated by the Minister of Economy and Finance, Giancarlo Giorgetti, during the press conference called at the Mef with the president of Ita Airways, Antonino Turicchi and the CEO of Lufthansa, Carsten Spohr.
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