MILAN- In order to obtain approval for the wedding, ITA Airways (AZ) and Lufthansa (LH) are prepared to offer a “substantial” package of slots at Linate airport, allowing a competing carrier to enter on some short-haul routes in Rome (FCO) and Milan (MXP), transferring traffic rights, and even guaranteeing to the EU Antitrust a “freeze” of fares on intercontinental flights between Italy and North America.
However, on other points, the two carriers are currently inflexible and are attempting to challenge the parameters used by European Commission technicians. Three European sources, familiar with the documents received in Brussels, explained this to Corriere della Sera.
Lufthansa ITA Merger Update
According to the offices led by Competition Commissioner Margrethe Vestager, the merger between the two airlines would result in an anti-competitive situation on 39 routes (international and intercontinental) and a dominant position at Linate airport.
This would lead to damage to consumers both economically and in terms of the quality of services offered. For this reason, on March 25, a long list of “objections” was sent to Frankfurt (FRA) and Rome (FCO). If these objections are not resolved, the EU Antitrust Authority will be compelled to block the merger in the skies.
On April 11, Lufthansa and ITA (along with the shareholder, the Ministry of Economy and Finance) submitted their counter-objections and a new package of “corrective” measures to the European Commission – following the one in January – to address EU concerns.
In over 200 pages, the two companies responded to every point highlighted by the Community objections. On Friday, April 19, the parties involved will have to present in a closed-door hearing in Brussels – not only to EU officials but also to consumer associations and organizations representing travel agencies – the merits of the merger project.
Problems at Intercontinental Flights
According to sources, the real problem lies in the area of intercontinental flights. Just a few days ago, the president of Ita, Antonino Turicchi, made it clear: asking the Italian carrier to sacrifice a large part of its long-haul routes, which are among the most profitable in the sector, is unacceptable.
In fact, among the 39 routes listed, there are 8 direct intercontinental routes (to the USA, Canada, and Japan) where ITA operates, and in 2024, it will operate a total of 13. The Italian company is expected to reduce its presence on more than 60% of its long-haul routes.
Regarding these routes, the proposal from Ita and Lufthansa does not involve making cuts, but rather a commitment to guarantee a certain level of service (interpreted as the number of seats available for sale), without reducing it after the merger, and consequently to maintain or reduce fares.
Since the European Commission is concerned that the merger could lead to a deterioration in service and an increase in ticket prices, according to Ita and Lufthansa, this proposal could address those concerns.
What’s Ahead?
According to the same European sources, the EU Antitrust Authority is inclined to request Ita and Lufthansa to reconsider the package of remedies, especially concerning intercontinental flights, without even conducting the so-called “market test.”
This would imply postponing the deadline for the dossier, currently set for June 6, by about twenty days. At that point, the Commission could provide its opinion on the merger operation by June 26.
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