What Are The Latest News About The Commercial Air Industry?

Following the pandemic-triggered market crash, the commercial air industry is rapidly recovering. Larger conglomerates eye expansion, with Lufthansa currently negotiating a 41% stake in ITA Airways for 325 million euros. This adds to Lufthansa’s prior acquisitions such as Swiss, Austrian and Brussels Airlines to name a few.

EU officials have raised concerns about potential competition law breaches and has prompted Lufthansa to offer concessions to secure EU approval. These include airport slots, traffic rights, and plane transfers to competitors. According to the office guided by the Commissioner for competition Margrethe Vestager, the acquisition would create an anti-competitive situation in 39 routes, both international and domestic, as well as a dominant position at Milan’s Linate airport.The deal mainly threatens fair competition particularly on short-haul routes between Italy and Central Europe, and long-haul routes to the US, Canada, and Japan. Lufthansa is willing to negotiate on 8 of 12 routes where it and ITA operate alone.The current issues are the types, and the amount of concessions Lufthansa is offering to compensate the dominant position it will end up holding. So far, rumors have been limited to air slots at Milan’s Linate airport and competitor entry into short-haul routes from Milan and Rome, as well as a blockade on increased pricing on Intercontinental flights between Europe and North America.All European providers face legislative scrutiny. IAG, owner of British Airways and a Lufthansa competitor, faces similar scrutiny in its bid for Air Europa.

So, what can we expect? Lufthansa attended a closed-door hearing on Friday, April 19th in front of senior Commission and national competition officials to discuss the deal, also with the participation of rival groups such as IAG. Guillaume Loriot, vice-general director of the Commission for mergers, as well as representatives of national competition agencies were also present. The Commission is due to decide on the deal by June 6th, 2024.

CC: Leonardo Morelli