Lufthansa’s ITA Airways deal could reduce competition, EU warns

By Foo Yun Chee

BRUSSELS (Reuters) -Lufthansa’s bid for a minority stake in ITA Airways could reduce competition in flights to and from Italy, EU antitrust regulators warned on Tuesday, ramping up pressure on the German carrier to offer stronger remedies.

Lufthansa wants to acquire a 41% stake in the state-owned Italian carrier for 325 million euros ($353.2 million) as part of a capital increase.

The European Commission opened an in-depth investigation, saying the deal could reduce competition in passenger air transport services on several short-haul and long-haul routes.

The EU competition enforcer said affected short-haul routes would be those connecting Italy with countries in Central Europe while long-haul routes between Italy and the United States, Canada, Japan and India could also be affected.

The investigation will examine whether ITA, Lufthansa and its joint venture partners United Airlines and Air Canada should be treated as a single entity after the merger.

The EU watchdog also warned that the deal could create or strengthen ITA’s dominant position at the Milan Linate airport.

Lufthansa said it would continue to work closely and constructively with the Commission, saying it firmly believed that the deal will be approved after the EU investigation.

The Commission now wants stronger concessions in airline mergers than merely giving up airport slots and said that remedies offered by Lufthansa were insufficient in scope and effectiveness to address competition concerns, confirming a Jan. 16 Reuters report.

“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,” EU antitrust chief Margrethe Vestager said in a statement.

The EU watchdog set a June 6 deadline for its decision.

($1 = 0.9203 euros)

(Reporting by Foo Yun CheeAdditional reporting by Ilona Wissenbach in FrankfurtEditing by David Goodman)