On 30 November 2023, Lufthansa AG (“Lufthansa”) and the Italian Ministry of Economy and Finance (“MEF”) notified the European Commission (“Commission”) of a proposed acquisition of joint control of ITA Airways (“ITA”) under merger control.
ITA is based in Italy and is an airline active in passenger and cargo air transport, which was created in 2020 by the Italian state. It is based at the Rome and Milan airports. It was created to replace Alitalia, and was exclusively controlled by the Italian state, which was therefore planning to cede part of its control to Lufthansa.
Following its preliminary examination, the Commission decided on 23 January 2024 to open an in-depth investigation to assess whether the proposed joint acquisition would present a risk under competition law in the sector of passenger air transport services in and out Italy. It then sent a Statement of Objections to the notifying parties. The Commission was indeed concerned that this project would reduce competition on certain short-haul routes from Italy to central Europe and on long-haul routes to the United States and Canada, and that it would create or strengthen a dominant position for ITA at Milan Linate Airport.
On 3 July 2024, following the submission of undertakings by Lufthansa and the MEF, the Commission approved Lufthansa's proposed acquisition of a stake in the Italian airline under the Merger Regulation, subject to certain conditions.
Lufthansa has therefore obtained EU approval to acquire 41% of ITA Airways for 325 million euros, with a view to acquiring a stake of up to 100% by 2033, at an estimated total cost of 829 million euros. This strategic operation is designed to strengthen ITA Airways' position in Southern Europe.
The agreement includes measures to preserve competition, such as the transfer of slots at Milan Linate Airport and the opening of routes to competitors (the remedy takers). These measures are designed to preserve competitive fares and avoid a reduction in service quality for passengers on the routes concerned.
More specifically, the commitments proposed by Lufthansa and MEF and validated by the Commission are as follows:
- Short-haul routes: Lufthansa and MEF must provide one or two rival airlines with the ITA slots for non-stop flights between Rome or Milan and certain Central European airports. They must also give them access to ITA's domestic network to offer indirect connections between certain Central European airports and Italian cities other than Rome and Milan.
- Long-haul routes: Lufthansa and MEF are to conclude agreements with rivals to strengthen their competitiveness on long-haul routes between Italy and North America (e.g. via interlining or slot swaps).
- Milan Linate Airport: Lufthansa and MEF have undertaken to transfer slots at Milan Linate Airport to other airlines for short-haul routes.
The implementation of these commitments is supervised by a trustee and monitored by the Commission.
In this context, Lufthansa and MEF have informed the Commission that easyJet has been selected as the remedy taker for short-haul routes and for the transfer of slots to Milan Linate Airport, and that International Airlines Group and Air France-KLM are the remedy takers for long-haul routes. In addition, proposals for related agreements with these remedy takers were submitted by Lufthansa and MEF to the Commission for approval.
On 29 November 2024, the Commission announced its approval of the submitted remedy takers, considered as “suitable”, having assessed the suitability of the remedy takers suggested by Lufthansa and MEF against the stated selection criteria (see below).
To this end, the Commission gathered extensive information from the shareholders of ITA and the three selected airlines, and also consulted the monitoring trustee appointed for the case.
The Commission considered that the relevant criteria were met, namely:
- The independence of these companies from Lufthansa, MEF and ITA.
- Financial resources, proven expertise and incentives to act as viable and active competitive forces in competition with Lufthansa and ITA.
- No prima facie competition concerns or risks of delay in implementing the commitments.
In addition, the Commission has also validated the remedy agreements concluded by Lufthansa and MEF with the suitable remedy takers to implement the remedy package.
The implementation of these commitments should pave the way for greater competition on the Milan Linate Airport market.
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