The European Commission (EC) has opened an in-depth review of whether the Lufthansa Group's proposed tie-up with Italy's state-owned ITA Airways would harm competition.
Lufthansa plans to purchase a 41% stake in ITA. If the deal is finalized, ITA would immediately begin cooperating commercially and operationally with the Lufthansa Group airlines -- Lufthansa, Swiss, Austrian and Brussels as well as several smaller brands. Lufthansa has negotiated an option to purchase the remaining shares of ITA at a later date.
The EC said it is opening the in-depth review after a preliminary look into the proposed tie-up raised concerns. One primary area of inquiry will be whether the proposed transaction would diminish competition on long-haul routes from Italy, including to the U.S and Canada. In reviewing that question, the EC will assess whether Lufthansa and joint-venture partners United and Air Canada should be treated as a single competitive entity in the transatlantic market.
For the first quarter of 2024, ITA is flying 23.2% of the seat capacity between Italy and the U.S./Canada, Cirium flight schedule data shows. Coupled with United and Air Canada, that share would balloon to 47.6%. No current Lufthansa Group carrier flies between Italy and the U.S. or Canada.
Another primary concern, said the EC, is competition between Italy and Central Europe. On certain routes, the commission noted, ITA and Lufthansa Group airlines compete head-to-head with only limited competition, mostly from discount juggernaut Ryanair.
The EC also expressed concern that the proposed tie-up would strengthen ITA's dominant position at Milan's secondary Linate Airport.
"By opening the in-depth investigation, we want to further assess the transaction and ensure that the acquisition of ITA does not reduce competition in short-haul and long-haul traffic and that it will not lead to higher prices, less capacity or lower quality for passenger air transport services in and out of Italy," Margrethe Vestager, the EC's executive vice president in charge of competition policy, said in a prepared remark.
The EC said it will make a determination by June 6.
Travel Weekly has reached out to Lufthansa Group for comment.