Why the ITA-Lufthansa and Iberia-Air Europa marriages are in danger of blowing up
The more time passes, the more intricate the two "queen" operations of European air transport become, almost on the boulevard of [...]
Lufthansa
KLM
ITA Airways
Iberia
Air France
Air Europa
The more time passes, the more the two "Queen" operations of European air transport become tangled, almost on the brink of death: two suspended marriages struggling to be sanctioned. And the dubious and reluctant "master of ceremonies" is Brussels, namely the European Commission.
In this article:
The operations by which Lufthansa would acquire ITA's 41% and Iberia (on behalf of the IAG holding company) Air Europa's 100%, in fact, are in danger of never seeing the light of day.
It would be a very important short circuit for European air transport and a breath of fresh air for the alliance Skyteam (reporting to Air France-KLM in Europe) because it would avoid the loss of two member carriers (ITA would move to Star Alliance and Air Europa to oneworld).
The isolation of ITA Airways
Beyond the Spanish dynamic, however, it would be a blow to the Italian flag carrier, which would find itself once again Isolated in the international context (without a large reference group), with the need to put cash back in the till and with a new prospect of starting from scratch in the search for a strong international partner. With all the troubles of long political and bureaucratic timescales.
Did you get your flight cancelled, miss your connection, land late?
You could get up to 600€ compensation per person
Just a few days ago, however, Lufthansa's ceo. Carsten Spohr reiterated its interest in ITA Airways by waving a flag very dear to the very politics and the world of organized tourism.
"We need to free the Italians from the domination of a famous low-cost carrier in Italy," the ceo said on the sidelines of the German giant's financial data press conference, alluding to Ryanair's dominance.
Statements that mark a turning point in LH's strategy, but which also demonstrate the many difficulties the Group is encountering in the European forum, where the Commission set very strict stakes For the acquisition of ITA.
Commission investigations
According to Spohr, however, the marriage Has no competition-related problems, rather the acquisition "will bring more competition" to the peninsula.
According to the EU, however, there is some additional problem: the Germans had already in advance Offered concessions (on slots and routes) in an attempt to facilitate a quick green light for the agreement from the Commission. Concessions that were not considered sufficient.
The commission now has time until June 6 to make his decision, but LH's own ceo said he expects the go-ahead later this year. That may mean June, but it could also mean waiting until October-November 2024.
"With the opening of the in-depth investigation, we want to further evaluate the transaction and ensure that the acquisition of ITA does not reduce competition in the short- and long-haul traffic and that it does not lead to higher prices, lower capacity or lower quality for passenger air transport services in and out of Italy," he said a few weeks ago Margrethe Vestager, EU Competition Commissioner.
The decision, therefore, extends the already Long and harried process of securing a stable and integrated future for our flag carrier. In particular, the Commission is concerned that the agreement could reduce competition on routes between Italy and Central Europe.
As for the long-haul routes to North America, the EU said it will further assess whether ITA, Lufthansa and the transatlantic joint venture partners (United Airlines and Air Canada) should be treated as a single entity after the merger.
"The operation could reduce competition on some long-haul routes. Between Italy and the United States, Canada, Japan and India. The transaction could create or strengthen Ita's dominant position at Milan's Linate airport, which could make it more difficult for competitors to provide passenger air transport services from the airport in question," a Commission note pointed out a few days ago.
Lufthansa's moves
In the meantime, the Lufthansa Group may not be in such a hurry to close the process anymore; not least because it closed the 2023 budget with revenues up 15%, net income more than doubled to 1.7 billion (+112%), and operating income up to 2.7 billion with 123 million passengers carried (+20%).
The terth best financial performance of all time by the German giant, sanctioning a full recovery from the pre-Covid period.
Despite this, Carsten Spohr says how the Group is working "closely and in a constructive with the Commission European Union in order to reach a rapid conclusion and subsequent implementation of the settlement, which is currently being processed in the offices of the EU Antitrust Authority and sees June 6, 2024″ as the final date for a decision.
"The negotiations are going slower than expected, we were expecting a green light as early as the end of 2023," Spohr said.
Emirates and Delta: ITA's movements
Meanwhile, the president of ITA, Antonino Turicchi, moves in an unusual way: first he flies to Dubai and signs a codeshare agreement with Emirates (soon to involve frequent flyer programs as well) opening wide the doors of the Emirates carrier's network in the Middle East, Asia, the Far East and Africa to Italian passengers; then apparently (the conditional is a must) departed for Atlanta with a stopover in Paris.
The goal of this second trip, according to some analysts, would be to probe with Delta Air Lines and Air France-KLM the possibility of reopening negotiations if it sinks the project with Lufthansa.
Confirmation to this assumption also comes from the very recent statements of Lufthansa, which made it known-beyond what its ceo said-that may withdraw from the ITA operation "if the conditions set by the EU Antitrust Authority are excessively limiting and if the costs are excessive compared to the benefits."
Brussels is in no hurry
Great is the confusion under the (European) sky, and Brussels does not seem to fear these long times. Not least because the upcoming European elections (to be held in June of this very year) could upset the political picture and call into question whatever decisions have been made by the current Commission.
For this reason, therefore, not only has the EU imposed very strong stakes, but it seems Reluctant even in his role as "master of ceremonies" of two operations (also Iberia's acquisition of Air Europa) so important for air traffic consolidation.
"The concerns we have identified are actively discussed with companies so that they understand what to do to address them. In my experience it is up to the companies to decide," said a few days ago Commissioner Margrethe Vestager commenting on Lufthansa's possible turnaround.
A signal that underscores how Brussels is in no hurry to close the deal and how it is in no way accepting industrial and political pressure.
The stop at Iberia-Air Europe
The furrow is so strongly drawn that even Air Europa's acquisition of the 100% by the holding company IAG (which controls British Airways, Vueling, Ibera, Aer Lingus and Level) is in doubt. Despite the fact that it is a procedure that started before the ITA-Lufthansa one.
A few days ago, in fact, the two companies have announced the so-called "stop the clock" to their merger process, despite the fact that IAG has already made the purchase of Air Europa's 20% and agreed on the payment of 400 million euros For the remaining 80%.
Due to in-depth investigations by EU antitrust, concerned about a lack of competitiveness in the Spanish market and on routes to South America., the marriage is stalled and will have to wait until June as well.
In the meantime, however, the two carriers have applied for "stop the clock," a technical procedure provided for by the EU on mergers that is activated When the parties need more time To consider whether to give in to community demands.
All this is because according to Iberia and Air Europa, EU's demands for slot divestment in Spain are too "heavy." So the two entities are taking time to consider whether to make new and additional adjustments to the purchase proposal: solutions that could even include a resounding about-face.
As early as 2021, Air Europa and Iberia sought approval from the European Commission for the acquisition worth nearly a billion euros. A few weeks later the notification was withdrawn because the sacrifices demanded by Brussels had been assessed as "uneconomic."
Air France-Klm and the future with SAS
In the meantime, however, the Group Air France-KLM does not seem intimidated from the two events and proceeds with the acquisition of part of the shares of SAS airline.
Just in the past few days, in fact, Grupo Franco-Dutch ceo Benjamin Smith confirmed that the company's Scandinavian will switch from Star Alliance to Skyteam.
I Air France's plans, also plan to increase the 19.9% stake inside SAS with the aim of becoming the airline's first shareholder.
Meanwhile, the Scandinavian carrier-which by the end of the year is expected to emerge from Chapter 11, a kind of receivership to clear its debts-announced the summer launch of the direct flight between Copenhagen and Atlanta, or the hub of Delta Air Lines.
A route that enshrines the marriage of SAS with the entire Skyteam world and providing for the carrier's future membership in the North Atlantic Joint Venture. The latter has among its members Delta, Air France, KLM and Virgin Atlantic (which took over from the now defunct Alitalia).
Benjamin Smith pointed out that the transaction sees no antitrust-related problems except for the Flights between Amsterdam and Scandinavia (almost all of which are operated by KLM or SAS), and it is at Schiphol that the Franco-Dutch Group will have to organize to surrender numerous slots to competitors.
