The Competition Authority has recently examined a merger between two Italian carriers which resulted in the consolidation of their flight operations under joint control.

The merger falls within the scope of Article (5)(1)(b) of Law 287/1990. As such, it is subject to prior communication to the authority and is conditional on the authority's clearance. (From a European market perspective, the requirements for the application of Article 1 of the EU Merger Regulation (139/2004) were not met in this case.)

The authority analysed either geographical or product markets for all services involved in the merger, including scheduled flights, non-scheduled flights, cargo services and tour operator services. The effects of the concentration can be summarised as follows.

With regards to scheduled flights, overlaps were found to exist on seven domestic routes(1) operated by the carriers, but only in three cases(2) was this found to result in a significant increase in relevant market share for the new company. According to the authority's analysis, the effects of the increase will be mitigated by a reduction in market power for the new company due to two main factors:

  • From a competition law perspective, the airports involved are not congested, so no slot allocation system applies - moreover, Olbia airport is not coordinated. New entrants may therefore begin to operate services on the affected routes by using slots previously used for other destinations.
  • As there are no congestion problems at the affected airports, no administrative or technical barriers apply to the entry of new carriers.

The market position of the new company is fully open to challenge, as its market share on the three affected routes is subject to actual and potential competition. However, no significant overlaps exist on international routes for competition law purposes.

The other issues were decided as follows:

  • With regard to non-scheduled flights, only marginal overlaps exist; as a result, there was no finding of a restriction on competition.
  • In the air cargo market, the two carriers hold only marginal market shares.

No overlaps exist within the tour operator market, as only one party to the concentration is even marginally active in the market.

The authority's analysis was conducted in line with the European Commission's consolidated guidance on merger and acquisition operations between air carriers, by performing an assessment of each of the four relevant markets.

The identification of the market for scheduled flights was carried out by considering the routes on which services are operated according to the so-called 'city pair' method and on the basis of well-established evaluation criteria. Routes between city pairs or airports - and, in particular, between their respective catchment areas - each constitute a market representing the origin and destination of any journey and, as such, are not substitutable on the demand side.

The non-scheduled (ie, charter) flight market was analysed by reference to the bundle of routes for medium and long-haul air transport services within, to and from Italy. The charter market was deemed to be national.

The authority applied principles and criteria that have already been applied in a number of cases involving the air cargo market. As a starting point, it noted that each of the four forms of cargo service - air, sea, rail and road - constitutes a different market. It went on to analyse the type and size of the airports within the territory, the quality and price of the services on offer and specific demand issues. The air cargo market was deemed to be national.

The market for tour operator services was identified by taking into account the organisation and trading of integrated travel packages and tourism agency services package (including consultancy for travel and bookings).

The application of these criteria, taken together, led the authority to conclude that the concentration was anti-competitive in none of the relevant markets considered.

For further information on this topic please contact Laura Pierallini at Studio Legale Pierallini e Associati by telephone (+39 06 88 41 713), fax (+39 06 88 40 249) or email ([email protected]).


(1) Olbia-Naples, Olbia-Turin, Verona-Catania, Verona-Rome, Verona-Naples, Verona-Palermo and Torino-Catania.

(2) Olbia-Naples, Olbia-Turin and Verona-Naples.