On 3 July 2012 the European Commission (the "Commission") published the non-confidential version of its decision of 26 January 2012 prohibiting a proposed merger between Aegean Airlines and Olympic Air, which was notified to the Commission on 24 June 2010 (Case Comp/M.5830, the "Decision").

Cases in which the Commission prohibits a merger are rarely seen. This was only the second time since 2007 that parties even upon the submission of remedies did not succeed in obtaining clearance from the European Commission. Another well-published example of an outright prohibition concerns the Ryanair/Aer Lingus merger (Case Comp/M.4439), which was the first time the Commission prohibited a merger under the 2004 Merger Regulation (Regulation 139/2004). Furthermore, on 1 February 2012 the Commission announced that it had decided to block the proposed merger between Deutsche Börse and NYSE Euronext (see press release Case Comp/M.6166).

The Decision is especially relevant in that it underlines the importance of credible market entry which may be a possible mitigating factor for the parties' high market share.

As usual in airline mergers, the Commission assessed the relevant market on the basis of the "point of origin/point of destination" ("O&D") approach in which each O&D constitutes a separate market with its own characteristics in terms of passenger structure and product qualifications. From the market research, the Commission concluded that, except for in one route, ferry services and air services did not compete. Therefore, these services formed part of two separate markets. Furthermore, the Commission noted that Olympic Air and Aegean Airlines would obtain a market share of 90-100% of the passengers travelling on a number of Greek domestic routes. The transaction would therefore lead to the creation of a de facto monopoly and the elimination of competition between the parties, which in the absence of the transaction are close competitors.

As recently reported, on 7 June 2012, the acquisition of British Midlands Limited ("bmi") by the International Consolidated Airlines Group ("IAG") was conditionally approved by the Commission upon the release of fourteen daily slot pairs at London Heathrow in order to facilitate new entry (Case Comp/M.6447, see Stibbe's Competition Law Newsletter of July 2012). In the Aegean Airlines/Olympic Air merger, the parties also offered to release slots at various Greek airports. However, the Commission found that there were already sufficient slots available at most of the relevant airports. Moreover, the market test did not reveal any credible entry plans by any carriers. Consequently, the Commission found that the notified concentration would lead to a significant impediment to effective competition on nine domestic routes. The notified concentration was declared incompatible with the internal market and was therefore prohibited.

The parties have lodged an appeal against the Decision, the judgment is pending (Case T-202/11).