"The rejection of a merger is very rare", said European Commissioner for Competition Margrethe Vestager on Lufthansa-ITA context.

• A 'NO' from Brussels to a  merger is very rare, reads a statement.

• Lufthansa-Ita nerger discussion is open. No conclusion has yet been reached , says Margrethe Vestager, the EU Commissioner for Competition.

• Vestager stressed the need to avoid the risk that consumers could find themselves paying higher prices and having fewer options in the future.

• Vestager said she could recall only 10 cases of mergers not being greenlit during her long stint on the EC.

Subject is Lufthansa-ITA merger, and the European Commissioner for Competition, Margrethe Vestager, encourages the German buyer to continue in negotiations: the development of larger airlines is important, respecting competition and consumers.

The deadline for the Lufthansa and ITA merger decision by the European Commission is set for the fourth of July.

• The European Commission has already informed Deutsche Lufthansa AG (‘Lufthansa') and the Italian Ministry of Economy and Finance (‘MEF') of its preliminary view that their proposed acquisition of joint control of ITA Airways (‘ITA') may restrict competition on certain routes in the market for passenger air transport services in and out of Italy.
• 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.

While asked if the merger plan between Lufthansa and ITA will be rejected, Vestager replied,

"There are few cases in which we have prohibited an acquisition. I think it's been ten so far, so it's really very rare for that to happen," 

"In the vast majority of our cases, we give the go-ahead for the acquisition. There are also mergers in which remedies are needed." 

As per sources, the latest proposal from the Germans is to enter the Italian company with 41% of the capital – with a capital increase of 325 million euros – and then postpone the actual integration for 12-18 months.

Competition Commissioner Margrethe Vestager further added :

"Discussions are ongoing, there is no conclusion yet on the case, no comment on personal feelings."

This was her response when asked to comment on the news that appeared in the Italian press regarding the alleged request to Lufthansa to postpone the integration of the two airlines, after the German company acquired 41% of Ita's capital. Such a request would have been considered offensive.

Vestager also said:

"We are considering the situation and discussing the remedies needed to ensure competition, as we face the risk that consumers may find themselves paying higher prices and having fewer options in the future."

Previously, the head of the European Antitrust Authority had said:

"In a case like this" of Ita-Lufthansa "we have competition problems. There is a risk that prices will go up and frequencies will fall. It is up to the companies to explain how to prevent this from happening. And that's the process we're in now. No decision has been taken."

The Statement of Objections By European Commission

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 Lufthansa-ITA 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.

As per experts, Lufthansa would be much interested in the lucrative Italian routes, and industry should not be much surprised if the Italian carrier becomes another low-cost subsidiary of Lufthansa Group.

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