The European Commission has 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.

The Statement of Objections

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 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.

Every year, millions of passengers travel on those routes for a total annual spending of over €3 billion. The Commission's objective is to ensure that the transaction would not lead to adverse effects for customers – consumers and businesses alike – in terms of increased prices or decreased quality of services. ITA has had a successful start to its operations. The Commission is concerned that, absent suitable remedies, the removal of ITA as an independent airline may have negative effects on competition in these already concentrated markets. The routes giving rise to potential concerns represent a small share of total short- and long-haul routes and passengers served by both parties and their joint venture partners, and the potential concerns do not affect the vast majority of routes that ITA operates.

A Statement of Objections is a formal step in an investigation, where the Commission informs the companies concerned in writing of the objections raised against them. The sending of a Statement of Objections does not prejudge the outcome of the investigation. Lufthansa and MEF now have the opportunity to reply to the Commission's Statement of Objections, to consult the Commission's case file and to request an oral hearing.  

Lufthansa and MEF also have the possibility to put forward remedies to address the preliminary competition concerns identified by the Commission. They can decide to submit remedies at any time of the proceedings until the remedy deadline, which currently falls on 26 April 2024.

Companies and products

ITA, headquartered in Italy, is a full-service carrier with domestic and international operations in passenger and cargo air transport. ITA operates a hub-and-spoke network with its principal hubs in Rome and Milan. ITA was created by the Italian State in October 2020 and it had a successful year 2023. ITA is a member of the SkyTeam alliance.

Lufthansa, headquartered in Germany, is a global full-service carrier with domestic and international operations in passenger and cargo air transport. Lufthansa also operates a hub-and-spoke network with its principal hubs in Frankfurt, Munich, Zurich, Vienna and Brussels. Its subsidiaries include Austrian Airlines, Brussels Airlines, Eurowings, Swiss International Airlines and Air Dolomiti. Lufthansa is a member of the Star Alliance, of a transatlantic joint venture with United Airlines and Air Canada and of a joint venture for traffic between Europe and Japan with All Nippon Airways.

MEF carries out the tasks and responsibilities of the Italian government in the fields of economic policy, financial policy, budgeting, and tax policies. MEF holds shareholdings in public and strategic companies in Italy, among others in the transport sector, and it is currently the sole shareholder in ITA. The companies in which MEF has shareholdings are active worldwide.

Background

The transaction was notified to the Commission on 30 November 2023. On 8 January 2024, Lufthansa submitted commitments to address some of the Commission's preliminary concerns. However, these commitments were insufficient, in terms of both scope and effectiveness, to clearly dismiss the Commission's preliminary concerns. The Commission therefore did not test them with market participants.

The Commission opened an in-depth investigation on 23 January 2024 and has until 6 June 2024 to take a final decision.

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the European Economic Area or any substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

In addition to the current transaction, there is currently one ongoing Phase II merger investigation, namely the proposed acquisition of Air Europa by IAG.

More information will be available on the Commission's competition website, in the Commission's public case register under the case number M.11071.