Lufthansa's entry into Italy could cause a price increase for customers and one decrease in the quality of services. This is the fear of European Commission vwho formalized the preliminary conclusions on the project to the German company and the Italian Ministry of Economy.
The EU Commission's criticisms of the Ita-Lufthansa merger
The letter ("statement of objections") from the competition services of the European Commission lists the findings and critical issues to be overcome before being able to give the OK to the merger of the two companies, expected by 6 June.
Brussels had launched the in-depth investigation on January 23 to assess whether the acquisition of a stake in Ita by Lufthansa could limit competition in the provision of passenger air transport services within and outside Italy. The critical issues that emerge from the Brussels letter can be summarized in a single sentence: the merger “could restrict competition on some markets and routes in the market for passenger air transport services in and out of Italy", reads the document. In the viewfinder there are links with Central Italy and those between Italy and United States, Canada and Japan. Not only that, according to Brussels, the alliance could create or strengthen Ita's dominant position at the airport Milan-Linate.
Brussels added that every year millions of passengers travel on those routes for a total annual expenditure of over 3 billion euros. The Commission's objective is to ensure that the operation “does not lead to negative effects for customers – consumers and businesses – in terms of increases in prices or decreases in the quality of services”. In fact, the Commission fears that, in the absence of adequate solutions, “the elimination of ITA as an independent airline could have negative effects on competition in these already concentrated markets."
The Statement of Objections is a formal step in an investigation, where the Commission informs the companies concerned in writing of the objections raised against them. Sending a communication does not prejudge the outcome of the investigation, Brussels specifies, and the two companies now have the opportunity to respond to the communication and to propose solutions to address preliminary competition concerns. Ita and Lufthansa can also decide to present remedies at any time during the proceedings until the end of the appeal, which currently falls on 26 April 2024.
Giorgetti attacks the EU Commission
Only two days ago, the Minister of Economy Giancarlo Giorgetti, in view of today's decision, had accused Brussels of hindering the Lufthansa/ita operation by declaring that "for ten months we have been fighting with Europe which does not allow us to create a European champion that can compete with the international giants."
The reply from the Vice President of the European Commission arrived shortly after, Margrethe Vestager: “If you trace the history of merger approvals in my ten years” at the European Commission, you will see that numerous large companies have arisen through mergers, and this is because very often it is possible to approve a merger while preserving competition", he said.
Through a statement, Lufthansa instead made it known that "we are doing further progress with our planned investment in Ita Airways. We will analyze the objections presented by the EU Commission, we will discuss each single point in detail with the Antitrust Authority and, in the subsequent phases, we will continue to cooperate constructively with the EU Commission”.
As suggested by Executive Vice President Margrethe Vestager, Lufthansa has announced that it will submit a proposal with the aim of addressing issues of national concern. “We remain confident that the operation will be approved – continues Lufthansa – also because we are convinced that competition in Europe, especially in Italy, can be strengthened by an Ita Airways part of the Lufthansa group. As part of our “multi-hub” and “multi-brand” structure Ita Airways will benefit from the same synergies of our Group that have already made Swiss, Austrian Airlines or Brussels Airlines successful airlines. The Lufthansa Group's participation in Ita Airways creates added value for both partners through the combination of our brands and business models, as well as through the interaction of our different hubs and connection networks." “We will not comment on the details of the confidential proceedings or the objections presented today – we read again in the note -, but we can say that we are ready to propose constructive solutions compatible with an aviation economic reality as competitive as the Italian one and that we are confident in the fact that Ita will become part of the Lufthansa Group family by the end of this year.”
