The issue is that this action does cause customers to pay more and receive a lower standard of service. Before approving the merger of the two organizations, the opposition service of the European Commission have outlined the complaints and unresolved problems. By June 6 is expected to make the final decision.
Italia Trasporto Aereo S. p. A., dba ITA Airways, is Italy’s symbol provider. It was established in 2020 as the heir apparent to Alitalia and is owned by the Italian state through the Ministry of Economy and Finance. The airport flies to over 70 scheduled home, German, and international locations
The European Commission has identified three possible areas of concern.
The alliance may lessen opposition on certain short-haul roads connecting Italy to Central European nations, lessen opposition on certain long-haul routes between Italy and the United States, Canada, and Japan, and strengthen ITA’s status as the market leader at Milan-Linate Airport.
ITA – Lufthansa Operation at Risk of Failure
Until the European Commission approves, Lufthansa’s investment of 325 million Euros in acquiring a 41 % stake in ITA remains on hold, as do the commercial synergies between ITA and Lufthansa’s network.
By April 26, 2024, Lufthansa and the Italian Ministry of Economy can provide “remedies” to the competition concerns raised by the integration of Lufthansa and ITA, as listed in the statement of objections.
Italian Economy Minister Giancarlo Giorgetti criticized the EU Commission on Saturday, March 23 for allegedly obstructing the Lufthansa-ITA agreement, saying:” In response to the pending document from Brussels,…
We have been having a ten-month fight with Europe, which prevents us from developing a European champion capable of battling international giants.
In a swift response, Margrethe Vestager, Vice President of the European Commission, stated:
Emerging vs. Competition
You will find that numerous large companies have been created through mergers if you examine the history of merger approvals during my ten years at the European Commission. This occurs because merger approval can often be kept in balance with protecting competition.
The European Commission’s document emphasizes that Lufthansa and ITA operate extensive networks of routes from their respective hubs in Austria, Belgium, Germany, Switzerland, and Italy.
Lufthansa collaborates with United Airlines and Air Canada for transatlantic flights, and with All Nippon Airways for flights to Japan.
Joint venture partners coordinate pricing, capacity, scheduling, and revenue sharing.
ITA could limit competition
On January 23, Brussels conducted an in-depth investigation to determine whether Lufthansa’s purchase of a stake in ITA would stifle competition in passenger air transportation services.
Following the investigation, the Commission is concerned that the operation may lead to a decrease in competition on some short-haul routes connecting Italy to Central European nations.
Lufthansa and ITA compete head- to- head on such routes, mainly with direct and indirect flights.
Low-cost carriers, which are the main rivals on some of these routes, may experience less competition on long-haul routes between Italy and the United States, Canada, and Japan.
The agreement may reduce competition on specific long- haul routes between Italy and the United States, Canada, and Japan, where ITA and Lufthansa, along with their joint venture partners, compete directly or indirectly.
After the merger, the Commission considers the activities of ITA, Lufthansa, and their joint venture partners as those of a single entity.
ITA’s Dominant Milan Hub
This could increase ITA’s standing at Milan-Linate Airport and make it more difficult for rivals to offer passenger air transportation services there.
According to Brussels, millions of passengers travel on these routes each year, and there are annual costs of more than 3 billion euros.
The Commission aims to make sure that the operation “does not have negative effects on customers – consumers – and businesses – in terms of price increases or service quality reductions.”
The Commission “freaks that eliminating ITA as an independent airline could negatively affect competition in these already concentrated markets.
The majority of the routes operated by ITA are not affected by potential concerns because only a small portion of the total short- and long-haul routes and passengers are served by both parties and their joint venture partners.
Lufthansa is confident that the project will ultimately be approved. SOURCE: EU puts the ITA merger with Lufthansa on hold BY: eTurboNews | eTN
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