The European Commission (EC) has given Lufthansa Group its consent to proceed with the acquisition of LGW - Luftfahrtgesellschaft Walter (Dortmund) from Air Berlin (1991) (Berlin Tegel) by the German group.
The European Union's competition regulator said in a statement that the decision is conditional on Lufthansa's compliance with commitments to avoid competition distortions.
The German carrier had planned to acquire both LGW and its Austrian sister carrier, Niki (Austria) (Vienna), along with their respective aircraft, crews, and slots, as part of a EUR210 million euro (USD248.7 million) deal announced with bankrupt Air Berlin in September of this year. The transaction had also included a number of additional Air Berlin aircraft, crew and slots at several EU airports, in particular in Austria, Germany, and Switzerland. These assets were transferred to LGW.
Concerning the purchase of LGW, the EC's said its investigation into the proposed transaction showed the increase in Lufthansa's slot portfolio at Düsseldorf airport, through the acquisition of LGW, was likely to adversely affect passengers in terms of fares and/or choice of services. Aside from these concerns, the regulator said it had found no other instances where a similar impact on choice and pricing would occur because either the affected airports were not as highly congested, or the size of Lufthansa's slot portfolio post-acquisition did not raise competition issues.
To placate the EC's concerns, Lufthansa agreed to limit the transfer of slots at Dusseldorf airport, for the summer season, to the number of slots used by two aircraft.
"Thanks to these commitments, Lufthansa's slot holding at Dusseldorf airport would only increase by 1%, compared to a scenario without the transaction," Commissioner Margrethe Vestager, in charge of competition policy, said. "50% of slots at Dusseldorf airport will be held by Lufthansa's competitors. This means that the effects of Lufthansa's acquisition of LGW would be limited."
Concerning its purchase of Niki, the EC said its investigation had shown Lufthansa and Niki services overlapped on around 130 routes. Had the takeover gone ahead as planned, the newly merged entity would have enjoyed near market dominance on around seventy of these 130 routes. In addition, on around fifty of those routes, Lufthansa would have had a quasi-monopoly for the supply of seats to tour operators and passengers.
Instead of submitting adequate remedies to address the Commission's concerns, the EC said Lufthansa had decided to exercise its pre-negotiated right to drop Niki from the scope of the transaction. This fateful decision led the Austrian production carrier to then file for bankruptcy a day after the announcement was made. As of this moment, Niki is on the market with several prospective buyers having expressed an interest in the airline.
For its part, Lufthansa has now confirmed that once its acquisition of LGW closes in January, thirty-three aircraft (twenty Dash 8-400s and thirteen A320-200s) will be added to the Eurowings Group fleet. All LGW employees will also be transferred to Eurowings with their current contracts of employment. With additional recruitments, the number of personnel in LGW’s flight operations should grow to up to 870 in 2018, the Group said.
