On 5 July 2019, the European Commission approved under certain conditions the acquisition of Flybe by Connect Airways, a consortium of Virgin Atlantic, Cyrus Capital Partner, Stobart Group.
Virgin Atlantic, Cyrus and Stobart Group will acquire, through Connect Airways, joint control of Flybe and its trading subsidiaries, Flybe Limited and Flybe.com Limited, for a purchase price of £2.2 million. The consortium will also acquire joint control of Propius Holdings Ltd, Stobart Aviation Limited’s aircraft leasing business, as well as an interest in Stobart Aviation’s airline operating business, Stobart Air Unlimited Company.
The business activities of the undertakings concerned are as follows:
- Virgin Atlantic: the ultimate holding company of international passenger airline Virgin Atlantic Airways and international tour operator Virgin Holidays. Given its main focus on long-haul operations, Virgin Atlantic does not have a strong share of domestic passengers. Virgin Atlantic is currently controlled by Virgin Group and Delta Air Lines. On 12 February 2019, the Commission gave unconditional clearance to the proposed joint control of Virgin Atlantic by Virgin Group, Delta Air Lines and Air France–KLM;
Both acquisitions fell under the scope of EU merger control and had to be notified to the European Commission.
On 21 February 2019, the Commission exceptionally granted Connect Airways a derogation by allowing it to acquire Flybe's shares prior to the merger clearance, subject to strict conditions, in particular with respect to voting rights. The derogation decision helped prevent flight cancellations to the detriment of consumers and helped avoid staff layoffs, during the merger review process.
Indeed, under the EU Merger Regulation, companies have the obligation not to implement a notifiable transaction before it has been declared compatible. If this standstill condition is not fulfilled, the Commission may imposed heavy fines on the undertakings concerned.
Nevertheless, under certain strict conditions, EU Merger Regulation enables the Commission to give a temporary approval for certain parts of a transaction in a way that does not harm effective competition, and in order to avoid negative effects for consumers.
In its investigation into the proposed concentration, the Commission verified the impact of the future group on the market for passenger air transport on routes from British airports to other European airports as well as certain intra-UK routes.
It first concluded that the concentration would have led to quasi-monopolies on two direct European routes, namely Birmingham - Amsterdam and Birmingham – Paris on account of Air France-KLM acquiring indirect control over Flybe, via its joint control over Virgin Atlantic.
The Commission was of the opinion that entry of competitors into these routes would be difficult due to the heavy congestion of Amsterdam Schiphol and Paris Charles de Gaulle airports.
To address those concerns, Connect Airways offered as commitments the release of five daily slot pairs at Amsterdam Schiphol airport and three daily slot pairs at Paris Charles de Gaulle airport.
The Commission considered that these commitments fully addressed the competition concerns identified with regard to Connect Airways' acquisition of Flybe.
The Commission also investigated the effects of the concentration on other markets, such as passenger air transport to/from Amsterdam Schiphol airport, cargo air transport services, groundhandling services and airport infrastructure services. The investigation on those markets did not raise any competition concerns.
The Commission decision is thus conditional upon full compliance with the commitments, and so the slots concerned are available to competing airlines…