The Swoop of Lufthansa on Air Berlin Stirs Competition Concerns

With the ink hardly dry on Lufthansa’s to take over large parts of the insolvent Air Berlin, the airline risks having its wings cut by rivals and regulators concerned regarding the unfair competition.

On Thursday, Lufthansa signed a deal that is worth 210 million euro (187.32 million pounds) to take over Air Berlin units LG Walter and Niki, including some short-haul planes, to safeguard its position in Germany and develop its Eurowings budget brand.

On Friday, Austrian competition authorities said that they believed that Lufthansa, which also controls Austrian Airlines, would be too powerful in Vienna if it also owned the Austria-based Niki.

“We see an anti-competitive Lufthansa monopoly in Vienna on many routes after the takeover of Fly Niki,” said the spokesperson of the competition authority. “We will voice our concern about the takeover at the European Commission.”

The German cartel office stated that it demanded the European Commission to take a close look at the said deal.

The European Commission did not have any comment, with a spokesperson saying that it had not yet been formally informed regarding the deal.

Late on Friday, easyJet separately said that it was in talks to take on a maximum of 25 A320 aircraft that were operated by the insolvent Air Berlin if Germany at Berlin Tegel airport.

Currently, EasyJet flies from the Schoenefeld airport of Berlin.

RIVALS COMPLAIN

The said deal has also raised eyebrows with competitor airlines. Michael O’Leary, the Ryanair CEO, has dubbed it a “stitch-up,” saying that it would give Lufthansa a 95% share of the German domestic market. On Thursday, Ryanair said that it would take up its case with the European Union.

Lufthansa struck back at such claims, saying that the deal would have to be analysed not only from the German market’s point of view but Europe as a whole.

Lufthansa has said that it has a market share of 34% on routes to and from Germany, while Air Berlin had 14%. With the takeover of parts of Air Berlin that will continue to be under 48%, which Lufthansa says is equivalent to the market share of Ryanair in Ireland.

On Friday, the CEO of British Airways parent IAG, Willie Walsh, said he observed “significant” competition concerns regarding the deal, which would see Lufthansa taking on about 80 of 130 planes of Air Berlin.

On Thursday, the Lufthansa CEO, Carsten Spohr, said that he expected that the deal would be approved by the end of 2017.

A company source said that Lufthansa was confident of receiving approval, but anticipated that there would be some remedies, as was also the case when Lufthansa bought Swiss International Air Lines and Austrian Airlines.

Air Berlin remains in discussions with the easyJet of Britain regarding other assets.