On 21 December 2017, the European Commission announced it had conditionally authorized the acquisition by the largest German airline of a subsidiary of the second largest airline in Germany, after the latter filed for insolvency in August 2017. 

The initial scope of the proposed transaction included the acquisition of a leisure air carrier, a regional air carrier and other aircraft, crew and slots. However, in order to secure the Commission’s clearance, the airline had to submit two sets of commitments before the Commission was satisfied that they would comprehensively address the competition concerns raised by the transaction. 

One of the key remedial solutions put forward by the airline was to substantially reduce the scope of the transaction as initially notified. In particular, the airline decided to abandon the acquisition of the leisure air carrier. This possibility was already contemplated in the sale and purchase agreement, pursuant to which the airline was enabled to modify the transaction perimeter. Concerning the transaction in its modified scope, the Commission still considered that it raised competition concerns at Düsseldorf airport because of the number of slots the airline would hold at this airport, post-transaction. It was, however, satisfied with the airline’s commitments to reduce the number of the acquired slots. 

An interesting element in this case was the fact that, before the proposed transaction was notified to the Commission, the airline sought the Commission’s derogation from the suspension obligation, pursuant to which reportable transactions in the European Union cannot be closed or implemented before they have been notified and cleared by the Commission. 

However, under the EU merger rules, the Commission may, on the basis of a reasoned request, grant a derogation from the suspension obligation. Typically, the Commission takes into account the effects of the suspension on one or more companies concerned by the transaction or on a third party and the threat to competition posed by the transaction. 

The airline relied on this exception in order to be able to implement a number of measures (e.g. financially support the air carrier to prevent that its lessors could repossess its aircraft and sell them to third parties, securing the continuity of operations to avoid the grounding of the air carrier’s aircraft) before notifying and obtaining the Commission’s merger clearance. The Commission’s derogation was granted on the basis of a number of strict conditions among which the obligation for the airline to notify the transaction to the Commission within a tight deadline.