The European Commission has approved, under the EC Merger Regulation, the proposed acquisition by Lufthansa of Austrian Airlines, provided the merged entity complies with certain conditions. The acquisition is part of the restructuring and privatisation of Austrian Airlines, made possible following the Commission’s approval of a State aid grant of €500 million to Austrian Airlines by the Austrian Government.

The Commission’s initial investigation found that the proposed merger transaction would lead to competition concerns on certain routes, potentially resulting in reduced consumer choice and the likelihood of increased prices. Lufthansa proposed a remedies package, intended to prevent further investigation, but this offer was declined by the Commission for failing to resolve all of the issues it identified. The Commission, therefore, commenced a Phase II investigation and subsequently received another package of proposed commitments from Lufthansa on 31 July 2009.

Following a thorough investigation, the Commission reduced the number of routes about which it had concerns to just five: Vienna to Frankfurt, Munich, Stuttgart, Cologne and Brussels. Lufthansa’s revised remedies package resolved all of the Commission’s outstanding concerns. It included a commitment to offer landing/take-off slots according to an efficient and timely slot allotment system, thereby allowing new entrants to operate flights or existing competitors to expand services on these routes. In addition, new entrants are to be given grandfathering rights over relevant slots if a route has been operated by them for a certain period of time. Other ancillary measures were also provided including participation in Lufthansa’s Frequent Flyer Programme.

The Commission was satisfied that these commitments would resolve issues associated with slot congestion, which would otherwise act as a barrier to entry on the five routes, and considers that the remedies should work to encourage the expansion of existing operators and the entry of new operators and, therefore, maintain effective competition.