By Foo Yun Chee, Ilona Wissenbach and Giuseppe Fonte
BRUSSELS/FRANKFURT/ROME (Reuters) – Lufthansa’s recent proposals regarding its acquisition of a stake in ITA Airways are reportedly similar to a previous package that was rejected by EU antitrust regulators. The regulators have also dismissed Ryanair as a competitor in their evaluation of the deal, according to sources familiar with the situation.
These factors are crucial for determining whether the German carrier will receive EU antitrust approval for its 325 million euro ($346 million) bid to purchase a 41% stake in the Italian state-owned ITA, the successor to Alitalia.
The aviation industry has witnessed several acquisitions in recent months, including the Lufthansa deal and British Airways owner IAG’s attempt to acquire Air Europa in Spain.
Lufthansa submitted its updated proposals to the European Commission last Thursday, after its initial offer was deemed insufficient three months prior. Both the EU competition authority and the airline have not disclosed the details of the proposals on either occasion.
The initial offer involved transferring airport slots, traffic rights, and aircraft to a competitor, as per a source familiar with the matter cited by Reuters.
While the new remedies are largely similar to the previous submission, there is a possibility of adjustments based on feedback from the Commission, competitors, and customers. The sources, who chose to remain anonymous due to the confidential nature of the deal, stated this.
However, failure to address the Commission’s concerns regarding competition on short-haul and long-haul routes between Italy and Central European countries, as well as ITA’s market dominance at Milan’s primary airport, could jeopardize the deal’s approval by the EU.
The Commission’s decision to exclude Ryanair as a competitor to Lufthansa, despite Ryanair holding over 40% market share in Italy, highlights the challenges faced by the German airline.
The sources mentioned that the regulator views Lufthansa and Ryanair as catering to different customer segments and operating at different types of airports.
Lufthansa is also disputing the Commission’s stance on long-haul flights, as the regulator only considers direct flights (e.g., Rome to New York) while Lufthansa argues that connecting flights from Italy via rival carriers’ hubs should also be taken into account.
The Commission, expected to make a decision on the deal by June 6, and Lufthansa have declined to provide comments.
($1 = 0.9404 euros) (This story has been refiled to add dropped word ‘bid’ in paragraph 2)
