After almost two years since the Italian government officially authorised the privatisation of ITA Airways, the merger with the Lufthansa Group seems to approach its final steps, with the European Commission approving the remedies proposed to ensure competition on certain routes.
1. Commission investigation
An investigation opened by the Commission in November 2023 found that, on certain routes to Central Europe, Lufthansa and ITA compete head-to-head on non-stop connections, with only limited competition, primarily from low-cost carriers, who operate from more remote airports, not Milan-Linate Airport, where ITA has a majority of the slots.
For routes to North America, no airline in the Lufthansa Group currently offers flights from Italy, however, the group does have a joint venture with United Airlines and Air Canada, through which they coordinate on price, capacity and scheduling and share revenues on transatlantic routes. The Commission wanted to further assess whether the activities of ITA, Lufthansa and its joint venture partners should be treated as those of a single entity after the merger, which could reduce competition on several long-haul routes between Italy and the US, Canada, Japan and India.
Domestically, the Commission was also worried about ITA’s dominant position at the Milan-Linate Airport, which could make it harder for rivals to provide passenger air transport services to and from the airport, and the reliance of other airlines on access to ITA’s domestic and short-haul network for their own operations, which could affect their services to international destinations also served by Lufthansa.
2. Approval of remedies
To address these concerns, Lufthansa committed to keeping some of ITA’s intra-European routes on which they compete directly. To steer off any transatlantic concerns, Lufthansa was not to include ITA in its venture with United and Air Canada for two years, while regarding the slots at Milan-Linate Airport, 40 were to be given to easyJet and Volotea. Following the proposed solutions, the European Commission approved the acquisition in July, conditional upon full compliance with the remedies.
Now, after some price disputes between the German airline group and the Italian Ministry of Economy and Finance (MEF), has approved more specific remedies proposed by the two to maintain competition. EasyJet is the remedy taker for the short-haul routes and for the transfer of take-off and landing slots at Milan Linate airport, while IAG (owner of British Airways) and Air France-KLM are the remedy takers for the long-haul routes.
The Commission has concluded that EasyJet, IAG and Air France-KLM are suitable remedy takers as they fulfilled the relevant criteria of being independence from Lufthansa, the MEF and ITA, having financial resources, proven expertise and incentives to act as viable and active competitive forces in competition with Lufthansa and ITA, and presenting no apparent competition concerns or risks in delaying the implementation of the commitments.
