The proposed tie-up between Lufthansa Group and Italy’s state-owned ITA Airways has sparked concerns within the European Commission (EC). As a result, the EC has decided to conduct an in-depth review to evaluate whether this collaboration would harm competition in the aviation industry. The potential acquisition would grant Lufthansa a 41% stake in ITA, with plans for further expansion. This article will delve into the primary areas of concern and explore the potential implications of this partnership.
One of the main concerns raised by the EC involves the impact of the deal on long-haul routes, particularly those connecting Italy to the United States and Canada. The EC aims to ascertain whether the partnership between Lufthansa and joint-venture partners United and Air Canada would create a single competitive entity in the transatlantic market. Flight schedule data from Cirium shows that ITA currently holds a 23.2% seat capacity between Italy and the U.S./Canada. If combined with United and Air Canada, this market share would increase significantly to 47.6%. The absence of any Lufthansa Group carrier on these routes further intensifies these concerns.
Another area of focus for the EC is competition between Italy and Central Europe. ITA and Lufthansa Group airlines currently compete head-to-head on specific routes, with limited competition from Ryanair, a discount airline giant. The commission fears that the proposed tie-up may strengthen ITA’s dominance at Milan’s secondary Linate Airport, potentially impacting pricing, capacity, and service quality. By conducting an in-depth investigation, the EC seeks to ensure that the deal does not harm competition in both short-haul and long-haul traffic and maintains consumer welfare.
The EC’s Executive Vice President in charge of competition policy, Margrethe Vestager, has highlighted the importance of the in-depth review in assessing the potential negative consequences of the Lufthansa-ITA Airways deal. The objective is to avoid a scenario where the acquisition results in higher prices, reduced capacity, or a decline in passenger air transport services in and out of Italy. Vestager’s prepared remark stresses the need to preserve a competitive market and safeguard the interests of consumers.
The Path Ahead
As the EC embarks on this comprehensive evaluation, the aviation industry eagerly awaits the outcome. The findings of the review will shed light on the potential impacts of the Lufthansa-ITA Airways tie-up and may lead to adjustments or additional measures to ensure a fair and competitive market. It remains to be seen whether any conditions or requirements will be imposed on the collaboration or if the deal will proceed without significant alterations. The future of this partnership will heavily rely on the EC’s assessment and subsequent decision.
While the partnership between Lufthansa Group and ITA Airways holds promise for both parties, caution is warranted to ensure it does not undermine competition in the airline industry. The European Commission’s in-depth review reflects the concerns surrounding the deal, specifically its potential impact on long-haul routes, competition in Italy and Central Europe, and ITA’s dominance at Milan’s Linate Airport. By closely scrutinizing these aspects, the EC aims to safeguard fair competition, consumer choice, and the overall quality of air transport services. As the review progresses, stakeholders eagerly await its outcome and the potential implications it will have on the aviation landscape.
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