The European Commission is investigating the proposed acquisition of joint control of ITA Airways (ITA) by Deutsche Lufthansa AG (Lufthansa) and the Italian Ministry of Economy and Finance (MEF).
The Commission has concerns that the deal could reduce competition on certain routes, potentially leading to higher prices or lower quality service for passengers.
EU Competition Concerns
Both Lufthansa and ITA operate vast networks of routes, with hubs in several European countries.
Lufthansa also has joint ventures with other airlines for transatlantic and Japan routes, allowing them to coordinate pricing, capacity, and scheduling.
The Commission’s investigation focuses on potential competition concerns:
Short-haul routes: The merger might reduce competition on specific routes connecting Italy to Central Europe, where Lufthansa and ITA currently compete directly or indirectly with other airlines, primarily low-cost carriers.
Long-haul routes: The Commission is concerned about potential reduced competition on routes between Italy and the US, Canada, and Japan.
On these routes, ITA currently competes head-to-head with Lufthansa and its joint venture partners. Here, the Commission considers the combined activities of all entities after the merger.
Dominant position at Milan-Linate airport: The merger could strengthen ITA’s dominance at Milan-Linate, making it harder for other airlines to operate there.
Millions of passengers use these routes annually, spending billions of euros. The Commission aims to ensure the deal doesn’t negatively impact consumers and businesses by raising prices or lowering service quality.
While ITA has had a successful launch, the Commission fears its merger with Lufthansa could stifle competition in already concentrated markets. It’s important to note that the routes causing concern represent a small portion of the total routes served by both airlines.
Lufthansa-ITA Proposal: Next Steps
The Commission’s “Statement of Objections” formally outlines its concerns to Lufthansa and MEF. This doesn’t prejudge the final decision.
Both parties have the opportunity to respond, access the Commission’s case file, and request a hearing.
Lufthansa and MEF can also propose remedies to address the competition concerns. The deadline for submitting remedies is currently April 26, 2024.
About the Companies
- ITA: A full-service Italian carrier offering domestic and international passenger and cargo services. It operates a hub-and-spoke network with hubs in Rome and Milan. Established in 2020 and a member of the SkyTeam alliance.
- Lufthansa: A German global full-service carrier offering domestic and international passenger and cargo services. It operates a hub-and-spoke network with hubs in several European cities. Lufthansa has subsidiaries like Austrian Airlines and Brussels Airlines and is part of various joint ventures for transatlantic and Japan routes.
- MEF: The Italian government body responsible for economic, financial, budgeting, and tax policies. MEF holds shares in public and strategic companies, including ITA.
Background
The transaction was notified on November 30, 2023. In January 2024, Lufthansa proposed solutions to address the Commission’s concerns, but the Commission rejected them.
The investigation was opened on January 23, 2024, with a final decision deadline of June 6, 2024.
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review.
More information will be available on the Commission’s competition website.
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