Lufthansa faces concessions to win approval for Air Berlin acquisition

Lufthansa faces concessions to win approval for Air Berlin acquisition

Lufthansa must reportedly offer significant concessions to win Brussels’ early approval of its purchase of Air Berlin assets – a deal regulators fear is likely to harm competition and increase prices.

The German group agreed in October to buy half of Air Berlin’s assets for an estimated €210 million.

The assets include Niki, Air Berlin’s Austrian holiday airline; its regional carrier LGW; and 20 other aircraft.

The deal would create high market share and even monopolies on some routes, said Margrethe Vestager, Europe’s competition commissioner in an interview with German newspaper Frankfurter Allgemeine Zeitung last month.

EU regulators are concerned that the move will increase prices and cut consumer choice.

German airline fares have risen significantly since Air Berlin was forced into insolvency in August, according to the German Business Travel Association (VDR).

To win permission for the deal, Lufthansa will probably need to sell some routes, and possibly even all of Niki, according to two people familiar with the case, the Financial Times reported.

It must provide clear-cut solutions to all the commission’s concerns if it hopes to gain approval this year, according to those people.

Lufthansa has until midnight to make its offer to Vestager.

In an interim decision, regulators said that the deal “likely threatens competition” within the European Economic Area

“The companies overlapped on more than 100 routes, with combined market shares above 60 per cent on around half of those routes, including the creation of monopolies in a number of cases,” it wrote.

They also worried that “strong positions at congested [German, Austrian and Swiss] airports . . . [may] raise barriers to entry for competitors”.

Lufthansa has been involved in 15 deals that have been required EU approval since 2000.

The commission will be using a well-established process, looking at many of the same routes that were examined in 2005 when Lufthansa bought Eurowings, according to people familiar with that case.

The main difference is that officials are likely to insist on an upfront buyer for the slots that Lufthansa will sell, which was not the case in the Eurowings case, according to the FT.

Assuming an offer is made, the EU will have until December 21 to either approve the transaction with the promised changes or launch an in-depth probe, which would delay the deadline to late spring 2019.

Complex cases can be approved without an in-depth investigation.

In addition to Lufthansa, EasyJet, British Airways owner IAG and Condor, a subsidiary of Thomas Cook, also bid for parts of Air Berlin in September.

EasyJet won part of the airline’s operations at Berlin’s Tegel airport.

Lufthansa received special permission from Brussels in late October to temporarily assume some of Air Berlin’s leases, and a €150 million loan guarantee was provided by the German state to keep the ailing airline flying.

Ryanair complained about the process to both German and EU competition officials and did not bid for Air Berlin assets.

“By the time the collapse was announced, the negotiations with Lufthansa were clearly already advanced. We had no confidence there would be an open and transparent [bidding] process for the assets,” Ryanair said.

Lufthansa declined to comment.

Condor said: “The dominant position that Lufthansa is seeking to further increase can only be allowed after an in-depth investigation and with the strictest possible remedies”.

The commission said that its investigation was ongoing and it could not prejudge the outcome.

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