EU Commission raises concerns over Lufthansa-ITA deal

The European Commission warned against Lufthansa’s intention to buy a minority stake in Italy’s ITA Airways, telling both the German flag carrier and the Italian Economy Ministry that the deal risks being rejected if no action is taken to resolve competition issues.

Lufthansa’s plan to acquire a 41% stake in state-owned ITA for €325 million would risk distorting competition on certain routes for passenger air transport services to and from Italy, affecting prices for customers, according to the European Commission’s preliminary assessment, which urges both parties to find remedies.

In response to the Commission’s assessment, the Italian ministry confirmed that it had received the findings and assured it would continue to work on the dossier in order to “present as soon as possible the remedies in order to reach a positive solution to the problem”.

In the Commission’s note on the matter, the EU’s executive stressed that on the short-haul routes connecting Italy and central European countries, “Lufthansa and ITA compete or will compete head-to-head mainly with direct flights, but also indirect flights. Competition on these routes appears to be limited and comes mainly from low-cost carriers, such as Ryanair, which in many cases operate from more distant airports”.

If the deal goes ahead, the Commission said it could also raise competition concerns on a number of long-haul routes between Italy and the US, Canada and Japan, where competition does not appear to be sufficient, the EU executive added.

The ITA-Lufthansa deal could also “create or strengthen ITA’s dominant position at the Milan-Linate airport”, the report added. This could make it more difficult for competitors to provide passenger air transport services to and from the city’s airport.

Meanwhile, the file has created some tension between Rome and Brussels.

In response to Economy Minister Giancarlo Giorgetti’s criticism of EU barriers, EU Competition Commissioner Margrethe Vestager said: “On the issue of European champions, if you look at the history of merger approvals during my now almost 10 years in office, you will see that a lot of great companies have been created through mergers”.

Lufthansa guarantees it will cooperate constructively with the Commission and will submit a remedy proposal to address the remaining concerns.

“We are convinced that competition in Europe, especially in Italy, can be enhanced by ITA becoming part of the Lufthansa group (…) and confident that Ita will become part of the Lufthansa group family by the end of this year,” it adds.

The parties have until 26 April to provide explanations and solutions.

(Federica Pascale | Euractiv.it)