Overview of the EU Commission’s Approval
The European Union Commission has officially approved Lufthansa’s plan to acquire a 41% minority stake in ITA Airways, marking a significant development in the aviation sector. This decision came after a thorough investigation concluded on July 3, 2024, ensuring that the merger complies with competitive standards. Lufthansa’s commitment involves a 325 million euros capital contribution, initially agreed upon in May 2023. This strategic move is expected to strengthen air traffic in Europe, making it more competitive on a global scale.
Details of the Agreement and Stakeholder Reactions
Carsten Spohr, CEO of Deutsche Lufthansa Group, expressed satisfaction with the EU’s decision, highlighting the benefits for passengers and the future integration of ITA Airways into the Lufthansa Group. The Italian Ministry of Economy and Finance (MEF), along with ITA Airways, also welcomed the approval, anticipating the completion of the transaction by the end of the year. Furthermore, the acquisition sets the stage for Lufthansa to potentially purchase remaining shares from 2025 onwards.
EU Commission’s Initial Concerns
The EU Commission’s investigation was driven by concerns over potential competitive imbalances on various air routes, particularly short-haul routes in Central Europe and long-haul routes to the US and Canada. Lufthansa and ITA Airways operate major hubs in these regions, and the merger raised questions about reduced competition and possible dominance, especially concerning ITA’s operations at Milan Linate Airport.
Remedies and Conditions Set by the EU
To alleviate these concerns, Lufthansa and the MEF proposed a comprehensive package of remedies. These measures include providing assets to rival airlines to support nonstop services between key Italian cities and Central Europe, and facilitating access to ITA’s domestic network. For long-haul routes, the agreement requires Lufthansa to establish competitive agreements, such as interlining or slot swaps, particularly focusing on improving service quality and price competitiveness on flights between Italy and North America.
Final Remarks by EU Officials and Future Prospects
Margrethe Vestager, the Executive Vice-President in charge of competition policy, emphasized the importance of maintaining competition within the aviation sector. The agreed remedies are expected to preserve competitive dynamics and prevent increased costs or decreased service quality for passengers. Looking forward, the successful implementation of these remedies will be crucial for the long-term success of the merger and the sustained competitiveness of the European aviation market.