It’s not a complete failure, but the road to the joint acquisition of airline Ita by Germany’s Lufthansa and the Italian state is certainly an uphill one. If the operation is given the green light, it could lead to painful cuts to routes between Italy and Central Europe and the sale of some slots at Milan Linate airport. So they’re central parts of the old Alitalia’s core business. This is what emerges from the European Commission’s preliminary assessment of the Ita-Lufthansa deal. Brussels believes the deal could violate EU competition rules and has therefore decided to launch an in-depth investigation.
According to the commission, the operation risks “reducing competition in the market for air passenger transport services on various short- and long-haul routes to and from Italy.” These are primarily short-haul routes between Italy and Central Europe. “Lufthansa and Ita are direct competitors on seamless connections, with limited competition from other airlines, especially low-cost carriers such as Ryanair, which in many cases operate from harder-to-reach airports,” a memo from Brussels reads. .
There are also long-distance routes between Italy on the one hand and the United States, Canada, Japan and India on the other. What is important in this case is that Lufthansa has a joint venture with two big names such as United Airlines and Air Canada. The addition of flights under ITA could reduce competition thanks to the “convenient direct flights” and “easy-to-access airport areas” that alliance members already rely on today.
One of the key steps in the Commission’s assessment concerns Milan Linate airport, where Ita holds approximately 60% of the airport slots. The sale of some of these slots has been requested by rivals in recent months, particularly by Ryanair boss Michael O’Leary. Brussels believes that “the operation could create a dominant position for ITA at Milan Linate airport or strengthen it by making it difficult for competitors to provide air passenger transport services to and from Milan Linate.”
The reservations expressed by the commission are not a bolt from the blue. In recent months, there have been discussions between Brussels Antitrust officials and Lufthansa. The EU executive explained last January 8 that the German group had “presented a set of commitments to respond to some of the Commission’s preliminary reservations” but that “these commitments were found to be insufficient, both in terms of scope and effectiveness, to overcome the Commission’s reservations”. The Commission therefore did not subject them to verification by market participants.”
The commission now has 90 working days until June 6, 2024, to make a decision. “The launch of an in-depth investigation does not prejudice the outcome of the trial,” Brussels recalls. A merger is possible. But Lufthansa and Ita will need to give up more market share than they currently seem willing to sacrifice.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
