Lufthansa’s proposed acquisition of a shareholding in Italian operator ITA Airways is to undergo in-depth scrutiny by the European Commission, over concerns that it will affect both the short- and long-haul market out of Italy.

While Lufthansa submitted commitments on 8 January intended to address some of the initial worries, the Commission says these were “insufficient, in terms of both scope and effectiveness”.

The Commission says it did not test the proposed remedies with market participants.

It states that the two airlines are “strong and close competitors” for passenger services on certain routes.

Lufthansa and ITA compete “head-to-head” on nonstop connections between Italy and Central Europe, it says, with third-party competition limited mainly to low-cost carriers – such as Ryanair – which typically only operate to remote airports.

ITA Airbus-c-SkyTeam

Source: SkyTeam

Analysis of ITA’s tie-up with Lufthansa will probe the effect on short- and long-haul routes

The Commission believes ITA’s dominant position at Milan Linate could potentially be reinforced by Lufthansa’s involvement, creating barriers for rival operators.

It will also look into potential issues on routes where carriers depend on access to ITA’s short-haul and domestic network.

“We want to further assess the transaction and ensure that the acquisition of ITA does not reduce competition,” says European competition commissioner Margrethe Vestager.

Alongside the short-haul probe, the investigation will examine long-haul transatlantic services from Italy to North America, to assess whether the activities of Lufthansa, ITA and joint-venture partner carriers United Airlines and Air Canada should be considered as those of a single entity.

Analysis of the tie-up will also cover long-haul services to Japan and India, and take into account both nonstop and one-stop connections, as well as convenient airport locations.

ITA is wholly-owned by the Italian economics ministry but Lufthansa is aiming to take a 41% stake through a capital injection and acquisition of new shares.

Under the framework for in-depth investigations the Commission has until 6 June to reach a decision on permitting the tie-up.