# C_2010016EN.01001101.xml

| 22.1.2010 | EN | Official Journal of the European Union | C 16/11 |
| --- | --- | --- | --- |

22.1.2010

EN

Official Journal of the European Union

C 16/11

---

Summary of Commission Decision

of 28 August 2009

declaring a concentration compatible with the common market and EEA Agreement

(Case COMP/M.5440 — Lufthansa/Austrian Airlines)

(notified under document C(2009) 6690 final)

(Only the English text is authentic)

(Text with EEA relevance)

2010/C 16/07

On 28 August 2009 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings
   (1), and in particular Article 8(2) of that Regulation. A non-confidential version of the full Decision can be found in the authentic language of the case and in the working languages of the Commission on the website of the Directorate-General for Competition, at the following address:

On 28 August 2009 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings

1

and in particular Article 8(2) of that Regulation. A non-confidential version of the full Decision can be found in the authentic language of the case and in the working languages of the Commission on the website of the Directorate-General for Competition, at the following address:

http://ec.europa.eu/comm/competition/index_en.html

http://ec.europa.eu/comm/competition/index_en.html

I.   INTRODUCTION

INTRODUCTION

| 1. | On 8 May 2009, the Commission received a notification of a proposed concentration by which the undertaking Deutsche Lufthansa AG (‘LH’) acquires sole control of the undertaking Austrian Airlines (‘OS’) by way of purchase of shares. |
| --- | --- |

1.

On 8 May 2009, the Commission received a notification of a proposed concentration by which the undertaking Deutsche Lufthansa AG (‘LH’) acquires sole control of the undertaking Austrian Airlines (‘OS’) by way of purchase of shares.

II.   EXPLANATORY MEMORANDUM

EXPLANATORY MEMORANDUM

A.   The parties

The parties

| 2. | LH is the largest German airline. It provides scheduled passenger and cargo air transport and related services. It has hubs at Frankfurt International Airport and Munich airport and a base at Düsseldorf airport. LH also controls Swiss International Air Lines Ltd (‘LX’), based at Zurich airport, Air Dolomiti, Eurowings, and the low-cost carrier Germanwings. In 2009, the acquisitions by LH of sole control over British Midland (‘BMI’) (without conditions) and over Brussels Airlines (‘SN’) (subject to conditions) were approved by the Commission and implemented by LH. Both LH and LX are members of the Star Alliance. |
| --- | --- |

2.

LH is the largest German airline. It provides scheduled passenger and cargo air transport and related services. It has hubs at Frankfurt International Airport and Munich airport and a base at Düsseldorf airport. LH also controls Swiss International Air Lines Ltd (‘LX’), based at Zurich airport, Air Dolomiti, Eurowings, and the low-cost carrier Germanwings. In 2009, the acquisitions by LH of sole control over British Midland (‘BMI’) (without conditions) and over Brussels Airlines (‘SN’) (subject to conditions) were approved by the Commission and implemented by LH. Both LH and LX are members of the Star Alliance.

LH

| 3. | OS is the largest Austrian airline with a principal hub in Vienna. It provides scheduled passenger and cargo air transport and related services. It is a member of the Star Alliance and its subsidiaries include Lauda Air and Tyrolean Airways. |
| --- | --- |

3.

OS is the largest Austrian airline with a principal hub in Vienna. It provides scheduled passenger and cargo air transport and related services. It is a member of the Star Alliance and its subsidiaries include Lauda Air and Tyrolean Airways.

OS

B.   The transaction

The transaction

| 4. | LH intends to acquire sole control over OS. On 5 December 2008, in the context of the privatisation process of OS, LH agreed to indirectly acquire a 41,56 % shareholding in OS from the publicly owned Österreichische Industrieholding Aktiengesellschaft (‘ÖIAG’). In addition, on 27 February 2009, LH launched a public offer for all remaining free-floating shares in OS, for which it received more than the required amount of declarations of acceptance. Together with the ÖIAG share LH will be able to acquire at least 85 % of the shares of OS. |
| --- | --- |

4.

LH intends to acquire sole control over OS. On 5 December 2008, in the context of the privatisation process of OS, LH agreed to indirectly acquire a 41,56 % shareholding in OS from the publicly owned Österreichische Industrieholding Aktiengesellschaft (‘ÖIAG’). In addition, on 27 February 2009, LH launched a public offer for all remaining free-floating shares in OS, for which it received more than the required amount of declarations of acceptance. Together with the ÖIAG share LH will be able to acquire at least 85 % of the shares of OS.

C.   Community dimension

Community dimension

| 5. | The notified concentration has a Community dimension within the meaning of Article 1(2) of the Merger Regulation. |
| --- | --- |

5.

The notified concentration has a Community dimension within the meaning of Article 1(2) of the Merger Regulation.

D.   Procedure

Procedure

| 6. | Based on the results of the first phase market investigation, the Commission concluded that the proposed transaction raised serious doubts as to its compatibility with the common market due to competition concerns identified with respect to passenger air transport on several routes. On 10 June 2009 and 18 June 2009, the parties submitted commitments which, however, proved not sufficient to eliminate the serious doubts identified by the Commission. On 1 July 2009, the Commission adopted a decision to initiate proceedings under Article 6(1)(c) of the Merger Regulation. |
| --- | --- |

6.

Based on the results of the first phase market investigation, the Commission concluded that the proposed transaction raised serious doubts as to its compatibility with the common market due to competition concerns identified with respect to passenger air transport on several routes. On 10 June 2009 and 18 June 2009, the parties submitted commitments which, however, proved not sufficient to eliminate the serious doubts identified by the Commission. On 1 July 2009, the Commission adopted a decision to initiate proceedings under Article 6(1)(c) of the Merger Regulation.

| 7. | On 10 July 2009, 17 July 2009, 27 July 2009 and 31 July 2009 LH submitted further commitments in order to enable the Commission to declare the concentration compatible with the common market under Articles 8(2) and 10(2) of the Merger Regulation. The final set of commitments concerns in particular the release and transfer of a number of slots at the airports in Vienna, Stuttgart, Cologne, Munich, Frankfurt and Brussels. |
| --- | --- |

7.

On 10 July 2009, 17 July 2009, 27 July 2009 and 31 July 2009 LH submitted further commitments in order to enable the Commission to declare the concentration compatible with the common market under Articles 8(2) and 10(2) of the Merger Regulation. The final set of commitments concerns in particular the release and transfer of a number of slots at the airports in Vienna, Stuttgart, Cologne, Munich, Frankfurt and Brussels.

E.   Markets for scheduled air transport of passengers

Markets for scheduled air transport of passengers

1.   The relevant product and geographic markets

The relevant product and geographic markets

| 8. | The parties’ passenger air transport activities overlap horizontally on a number of routes which can be grouped as follows: (i) short-haul routes connecting Austria to Germany, Switzerland, Belgium and the UK with direct overlaps; and (ii) routes with direct-indirect or indirect-indirect overlaps. |
| --- | --- |

8.

The parties’ passenger air transport activities overlap horizontally on a number of routes which can be grouped as follows: (i) short-haul routes connecting Austria to Germany, Switzerland, Belgium and the UK with direct overlaps; and (ii) routes with direct-indirect or indirect-indirect overlaps.

| 9. | The market investigation confirmed the Commission’s practice in previous cases where the relevant market for scheduled air transport of passengers was based on the ‘point of origin/point of destination’ (‘O&D’) city-pair approach, whereby all substitutable airports are included in the respective points of origin and points of destination. |
| --- | --- |

9.

The market investigation confirmed the Commission’s practice in previous cases where the relevant market for scheduled air transport of passengers was based on the ‘point of origin/point of destination’ (‘O&D’) city-pair approach, whereby all substitutable airports are included in the respective points of origin and points of destination.

| 10. | The Commission further investigated the issue of airport substitutability between Vienna International Airport Schwechat and Bratislava Airport, Frankfurt International Airport and Frankfurt Hahn Airport, Cologne-Bonn Airport and Düsseldorf International Airport, and Brussels National Airport Zaventem and Brussels South Charleroi Airport. |
| --- | --- |

10.

The Commission further investigated the issue of airport substitutability between Vienna International Airport Schwechat and Bratislava Airport, Frankfurt International Airport and Frankfurt Hahn Airport, Cologne-Bonn Airport and Düsseldorf International Airport, and Brussels National Airport Zaventem and Brussels South Charleroi Airport.

| 11. | With respect to the distinction between time-sensitive and non time-sensitive passengers, the market investigation confirmed the existence of a special demand of time-sensitive passengers. The effects of the present transaction have been assessed for time-sensitive passengers, and for all passengers on a given route. |
| --- | --- |

11.

With respect to the distinction between time-sensitive and non time-sensitive passengers, the market investigation confirmed the existence of a special demand of time-sensitive passengers. The effects of the present transaction have been assessed for time-sensitive passengers, and for all passengers on a given route.

| 12. | The market investigation confirmed the Commission’s practice in previous cases that for short-haul routes (flights up to three hours) indirect flights generally do not constitute a competitive alternative to direct flights. |
| --- | --- |

12.

The market investigation confirmed the Commission’s practice in previous cases that for short-haul routes (flights up to three hours) indirect flights generally do not constitute a competitive alternative to direct flights.

2.   Treatment of alliance partners

Treatment of alliance partners

| 13. | Both LH and OS are members of the Star Alliance. LH’s and OS’ alliance partners have not been taken into account for the determination of affected markets, since LH’s cooperation agreements will not be automatically extended to OS and vice versa. With respect to the competitive analysis on the affected markets, the relationships between the alliance partners and the impact on their incentive to compete against each other post-transaction have been assessed on a route-by-route basis. |
| --- | --- |

13.

Both LH and OS are members of the Star Alliance. LH’s and OS’ alliance partners have not been taken into account for the determination of affected markets, since LH’s cooperation agreements will not be automatically extended to OS and vice versa. With respect to the competitive analysis on the affected markets, the relationships between the alliance partners and the impact on their incentive to compete against each other post-transaction have been assessed on a route-by-route basis.

vice versa

3.   Relevant counterfactual for the routes where the parties have been cooperating

Relevant counterfactual for the routes where the parties have been cooperating

| 14. | The relevant counterfactual for the assessment of the effects of the proposed transaction on competition is either (a) the pre-merger cooperation between LH and OS; or (b) the most likely future development if the proposed acquisition of OS by LH were to fail. |
| --- | --- |

14.

The relevant counterfactual for the assessment of the effects of the proposed transaction on competition is either (a) the pre-merger cooperation between LH and OS; or (b) the most likely future development if the proposed acquisition of OS by LH were to fail.

| 15. | As regards the pre-merger cooperation between the parties, in particular the cost and revenue sharing joint venture between the parties on all routes between Germany and Austria has been considered. This joint venture was initially exempted by the Commission under Article 81(3) of the EC Treaty subject to conditions. After the expiry of the exemption decision and under the new procedural rules, notably Regulation (EC) No 1/2003 (2), the parties carried out a self-assessment. The current cooperation is based on contractual agreements that can be amended or terminated at any moment which is different from the structural change that would be created by a merger. With regard to the Austria-Germany routes the present transaction would change the parties’ contractual cooperation into a permanent structural link. |
| --- | --- |

15.

As regards the pre-merger cooperation between the parties, in particular the cost and revenue sharing joint venture between the parties on all routes between Germany and Austria has been considered. This joint venture was initially exempted by the Commission under Article 81(3) of the EC Treaty subject to conditions. After the expiry of the exemption decision and under the new procedural rules, notably Regulation (EC) No 1/2003 (2), the parties carried out a self-assessment. The current cooperation is based on contractual agreements that can be amended or terminated at any moment which is different from the structural change that would be created by a merger. With regard to the Austria-Germany routes the present transaction would change the parties’ contractual cooperation into a permanent structural link.

2

| 16. | In case the present transaction fails, the most likely future development appears to be, on the basis of the information available to the Commission, the acquisition of OS by another airline, and more specifically by Air France-KLM. OS would then terminate its pre-merger cooperation with LH as well as its Star Alliance membership and would join Sky Team. |
| --- | --- |

16.

In case the present transaction fails, the most likely future development appears to be, on the basis of the information available to the Commission, the acquisition of OS by another airline, and more specifically by Air France-KLM. OS would then terminate its pre-merger cooperation with LH as well as its Star Alliance membership and would join Sky Team.

| 17. | On those routes where the proposed concentration does not raise serious doubts as to its compatibility with the common market this is the case under both counterfactual situations. The Commission found that the proposed concentration raises serious doubts as to its compatibility with the common market with respect to the Vienna-Stuttgart, Vienna-Cologne, Vienna-Frankfurt and Vienna-Brussels routes under both counterfactual situations and, under the Air France counterfactual, also for the Vienna-Munich route. The question of whether the creation of a permanent structural link between LH and OS as such raises serious doubts with respect to the Vienna-Munich route can be left open, as the serious doubts identified for this route under the Air France-KLM counterfactual will be removed by the commitments offered by the parties. Ultimately, for the purpose of the present case, the question of which of these two situations constitutes the relevant counterfactual for the assessment of the present transaction can therefore be left open. |
| --- | --- |

17.

On those routes where the proposed concentration does not raise serious doubts as to its compatibility with the common market this is the case under both counterfactual situations. The Commission found that the proposed concentration raises serious doubts as to its compatibility with the common market with respect to the Vienna-Stuttgart, Vienna-Cologne, Vienna-Frankfurt and Vienna-Brussels routes under both counterfactual situations and, under the Air France counterfactual, also for the Vienna-Munich route. The question of whether the creation of a permanent structural link between LH and OS as such raises serious doubts with respect to the Vienna-Munich route can be left open, as the serious doubts identified for this route under the Air France-KLM counterfactual will be removed by the commitments offered by the parties. Ultimately, for the purpose of the present case, the question of which of these two situations constitutes the relevant counterfactual for the assessment of the present transaction can therefore be left open.

4.   Route-by-route assessment

Route-by-route assessment

4.1.   Routes between Austria and Germany

Routes between Austria and Germany

| 18. | On the Vienna-Stuttgart route (approximately [300 000-350 000] passengers per year, out of which around [250 000-300 000] are ‘O&D’ passengers) the Commission found that OS and Germanwings actually compete with each other and that the transaction would lead to a monopoly. Hence, on the Vienna-Stuttgart route the transaction as initially notified raises serious doubts as to its compatibility with the common market.









  Airline | SS 08 figures | WS 08/09 figures |
| --- | --- | --- | --- |
| Time sensitive | All passengers | Time sensitive | All passengers |
| LH | [10-20] % | [10-20] % | [10-20] % | [10-20] % |
| OS | [10-20] % | [10-20] % | [5-10] % | [10-20] % |
| Germanwings | [60-70] % | [60-70] % | [70-80] % | [70-80] % |
| Combined | 100 % | 100 % | 100 % | 100 % |
| Source: Estimates of the notifying party on the basis of MIDT data. Unless indicated otherwise, all market shares mentioned hereinafter are MIDT data provided by the notifying party. |

18.

On the Vienna-Stuttgart route (approximately [300 000-350 000] passengers per year, out of which around [250 000-300 000] are ‘O&D’ passengers) the Commission found that OS and Germanwings actually compete with each other and that the transaction would lead to a monopoly. Hence, on the Vienna-Stuttgart route the transaction as initially notified raises serious doubts as to its compatibility with the common market.

Vienna-Stuttgart route

Airline

SS 08 figures

WS 08/09 figures

Time sensitive

All passengers

Time sensitive

All passengers

LH

[10-20] %

[10-20] %

[10-20] %

[10-20] %

OS

[10-20] %

[10-20] %

[5-10] %

[10-20] %

Germanwings

[60-70] %

[60-70] %

[70-80] %

[70-80] %

Combined

100 %

100 %

100 %

100 %

Source: Estimates of the notifying party on the basis of MIDT data. Unless indicated otherwise, all market shares mentioned hereinafter are MIDT data provided by the notifying party.

Source:

| 19. | On the Vienna-Cologne route (approximately [250 000-300 000] passengers per year, out of which [250 000-300 000] are O&D passengers), the Commission found that OS and Germanwings actually compete with each other and that the merger would lead to a monopoly. TUIfly plans to start operations on this route, but as TUIfly is in the process of being divested, it is yet unclear whether and to what extent TUIfly will exercise a competitive constraint on the parties. In view of the above, on the Vienna-Cologne route the transaction as initially notified raises serious doubts as to its compatibility with the common market at least for time sensitive passengers.









  Airline | SS 08 figures | WS 08/09 figures |
| --- | --- | --- | --- |
| Time sensitive | All passengers | Time sensitive | All passengers |
| LH | [5-10] % | [0-5] % | [5-10] % | [0-5] % |
| OS | [5-10] % | [5-10] % | [5-10] % | [5-10] % |
| Germanwings | [80-90] % | [80-90] % | [80-90] % | [80-90] % |
| Others | [0-5] % | [0-5] % | 0 % | 0 % |
| Combined | 100 % | 100 % | 100 % | 100 % |

19.

On the Vienna-Cologne route (approximately [250 000-300 000] passengers per year, out of which [250 000-300 000] are O&D passengers), the Commission found that OS and Germanwings actually compete with each other and that the merger would lead to a monopoly. TUIfly plans to start operations on this route, but as TUIfly is in the process of being divested, it is yet unclear whether and to what extent TUIfly will exercise a competitive constraint on the parties. In view of the above, on the Vienna-Cologne route the transaction as initially notified raises serious doubts as to its compatibility with the common market at least for time sensitive passengers.

Vienna-Cologne

Airline

SS 08 figures

WS 08/09 figures

Time sensitive

All passengers

Time sensitive

All passengers

LH

[5-10] %

[0-5] %

[5-10] %

[0-5] %

OS

[5-10] %

[5-10] %

[5-10] %

[5-10] %

Germanwings

[80-90] %

[80-90] %

[80-90] %

[80-90] %

Others

[0-5] %

[0-5] %

0 %

0 %

Combined

100 %

100 %

100 %

100 %

| 20. | The Vienna-Munich route ([350 000-400 000] passengers, out of which [200 000-250 000] are O&D passengers), which is a hub-to-hub route, is operated both by LH and OS, and their competitor Niki Luftfahrt GmbH (‘Niki’). The market investigation has by and large confirmed the market share data provided by the parties. The combined market share of the parties is significant, and the constraint exercised by Niki can be considered only as limited, in particular for time-sensitive passengers. Intermodal competition by train cannot be considered a strong constraint, either. On the basis of the Air France-KLM counterfactual, the transaction would eliminate at least potential competition between the parties. Moreover, barriers to entry with respect to slots both in Vienna and in Munich are significant. In view of the above, on the Vienna-Munich route the transaction as initially notified raises serious doubts as to its compatibility with the common market under the Air France-KLM counterfactual.









  Airline | SS 08 figures | WS 08/09 figures |
| --- | --- | --- | --- |
| Time sensitive | All passengers | Time sensitive | All passengers |
| LH | [50-60] % | [30-40] % | [40-50] % | [30-40] % |
| OS | [20-30] % | [20-30] % | [20-30] % | [10-20] % |
| Combined LH+OS | [70-80] % | [50-60] % | [70-80] % | [50-60] % |
| Niki | [20-30] % | [40-50] % | [20-30] % | [30-40] % |
| Air Berlin | 0 % | 0 % | 0 % | [10-20] % |
| Others | [0-5] % | [0-5] % | [0-5] % | [0-5] % |
| Combined all | 100 % | 100 % | 100 % | 100 % |

20.

The Vienna-Munich route ([350 000-400 000] passengers, out of which [200 000-250 000] are O&D passengers), which is a hub-to-hub route, is operated both by LH and OS, and their competitor Niki Luftfahrt GmbH (‘Niki’). The market investigation has by and large confirmed the market share data provided by the parties. The combined market share of the parties is significant, and the constraint exercised by Niki can be considered only as limited, in particular for time-sensitive passengers. Intermodal competition by train cannot be considered a strong constraint, either. On the basis of the Air France-KLM counterfactual, the transaction would eliminate at least potential competition between the parties. Moreover, barriers to entry with respect to slots both in Vienna and in Munich are significant. In view of the above, on the Vienna-Munich route the transaction as initially notified raises serious doubts as to its compatibility with the common market under the Air France-KLM counterfactual.

Vienna-Munich

Airline

SS 08 figures

WS 08/09 figures

Time sensitive

All passengers

Time sensitive

All passengers

LH

[50-60] %

[30-40] %

[40-50] %

[30-40] %

OS

[20-30] %

[20-30] %

[20-30] %

[10-20] %

Combined LH+OS

[70-80] %

[50-60] %

[70-80] %

[50-60] %

Niki

[20-30] %

[40-50] %

[20-30] %

[30-40] %

Air Berlin

0 %

0 %

0 %

[10-20] %

Others

[0-5] %

[0-5] %

[0-5] %

[0-5] %

Combined all

100 %

100 %

100 %

100 %

| 21. | The Vienna-Frankfurt route (with over [600 000-650 000] passengers in 2008 out of which around [400 000-450 000] are O&D passengers) is a hub-to-hub route and is operated by both LH and OS. In addition, LH code-shares on flights operated by Adria Airways, a Star Alliance member. Other competitors are Niki and Air Berlin (who code-shares on Niki’s flights). The market investigation has by and large confirmed the market share data provided by the parties. On the basis of the pre-merger counterfactual, the transaction would eliminate actual competition on the route as it would lead to Niki’s exit (Niki’s slots are leased from LH on the basis of LH’s self-assessment under Article 81 of the EC Treaty of the cost and revenue sharing joint venture, and Niki would have to hand them back in case the joint venture between LH and OS would be terminated, for instance by means of a merger). On the basis of the Air France-KLM counterfactual, the transaction would eliminate potential competition between the parties. |
| --- | --- |

21.

The Vienna-Frankfurt route (with over [600 000-650 000] passengers in 2008 out of which around [400 000-450 000] are O&D passengers) is a hub-to-hub route and is operated by both LH and OS. In addition, LH code-shares on flights operated by Adria Airways, a Star Alliance member. Other competitors are Niki and Air Berlin (who code-shares on Niki’s flights). The market investigation has by and large confirmed the market share data provided by the parties. On the basis of the pre-merger counterfactual, the transaction would eliminate actual competition on the route as it would lead to Niki’s exit (Niki’s slots are leased from LH on the basis of LH’s self-assessment under Article 81 of the EC Treaty of the cost and revenue sharing joint venture, and Niki would have to hand them back in case the joint venture between LH and OS would be terminated, for instance by means of a merger). On the basis of the Air France-KLM counterfactual, the transaction would eliminate potential competition between the parties.

Vienna-Frankfurt

| 22. | The only remaining competitor on the Vienna-Frankfurt route would be Adria Airways who would not exercise a sufficient constraint on LH/OS as also its slots in Frankfurt are leased from LH and it depends on the code-share with LH. Moreover, even if Niki is taken into account, it does not constitute a strong constraint on the parties. On this route neither flights on Bratislava-Frankfurt-Hahn nor intermodal competition by train can be considered as a sufficient constraint. The barriers to entry are particularly high, as the slot capacity in Frankfurt is exhausted during the whole day, and the presence of LH is very significant. In light of the above, it is concluded that on the Vienna-Frankfurt route the transaction as initially notified raises serious doubts as to its compatibility with the common market.









  Airline | SS 08 figures | WS 08/09 figures |
| --- | --- | --- | --- |
| Time sensitive | All passengers | Time sensitive | All passengers |
| LH | [50-60] % | [30-40] % | [50-60] % | [40-50] % |
| OS | [20-30] % | [20-30] % | [20-30] % | [20-30] % |
| Combined LH+OS | [70-80] % | [60-70] % | [70-80] % | [60-70] % |
| Adria Airways | [0-5] % | [0-5] % | [0-5] % | [0-5] % |
| Niki | [20-30] % | [20-30] % | [20-30] % | [20-30] % |
| Air Berlin | 0 % | [5-10] % | 0 % | [5-10] % |
| Others | [0-5] % | [0-5] % | [0-5] % | [0-5] % |
| Combined all | 100 % | 100 % | 100 % | 100 % |

22.

The only remaining competitor on the Vienna-Frankfurt route would be Adria Airways who would not exercise a sufficient constraint on LH/OS as also its slots in Frankfurt are leased from LH and it depends on the code-share with LH. Moreover, even if Niki is taken into account, it does not constitute a strong constraint on the parties. On this route neither flights on Bratislava-Frankfurt-Hahn nor intermodal competition by train can be considered as a sufficient constraint. The barriers to entry are particularly high, as the slot capacity in Frankfurt is exhausted during the whole day, and the presence of LH is very significant. In light of the above, it is concluded that on the Vienna-Frankfurt route the transaction as initially notified raises serious doubts as to its compatibility with the common market.

Airline

SS 08 figures

WS 08/09 figures

Time sensitive

All passengers

Time sensitive

All passengers

LH

[50-60] %

[30-40] %

[50-60] %

[40-50] %

OS

[20-30] %

[20-30] %

[20-30] %

[20-30] %

Combined LH+OS

[70-80] %

[60-70] %

[70-80] %

[60-70] %

Adria Airways

[0-5] %

[0-5] %

[0-5] %

[0-5] %

Niki

[20-30] %

[20-30] %

[20-30] %

[20-30] %

Air Berlin

0 %

[5-10] %

0 %

[5-10] %

Others

[0-5] %

[0-5] %

[0-5] %

[0-5] %

Combined all

100 %

100 %

100 %

100 %

| 23. | On other investigated routes between Austria and Germany (Vienna-Berlin, Vienna-Düsseldorf, Vienna-Hamburg, Vienna-Hanover, Vienna-Nurnberg, Munich-Linz, Vienna-Dresden, Vienna-Leipzig, Salzburg-Düsseldorf, Graz-Düsseldorf, Linz-Düsseldorf, Innsbruck-Frankfurt, Salzburg-Frankfurt, Innsbruck-Hamburg, Klagenfurt-Munich, Graz-Frankfurt, Graz-Munich, Graz-Stuttgart and Linz-Frankfurt) the transaction does not give rise to competition concerns, regardless of the counterfactual situation, as it would not significantly impede effective competition on these routes. |
| --- | --- |

23.

On other investigated routes between Austria and Germany (Vienna-Berlin, Vienna-Düsseldorf, Vienna-Hamburg, Vienna-Hanover, Vienna-Nurnberg, Munich-Linz, Vienna-Dresden, Vienna-Leipzig, Salzburg-Düsseldorf, Graz-Düsseldorf, Linz-Düsseldorf, Innsbruck-Frankfurt, Salzburg-Frankfurt, Innsbruck-Hamburg, Klagenfurt-Munich, Graz-Frankfurt, Graz-Munich, Graz-Stuttgart and Linz-Frankfurt) the transaction does not give rise to competition concerns, regardless of the counterfactual situation, as it would not significantly impede effective competition on these routes.

4.2.   Routes between Austria and Switzerland

Routes between Austria and Switzerland

| 24. | The transaction does not raise serious doubts as to its compatibility with the common market as it would not significantly impede effective competition on the routes between Austria and Switzerland, namely Vienna-Basel, Vienna-Geneva and Vienna-Zurich. |
| --- | --- |

24.

The transaction does not raise serious doubts as to its compatibility with the common market as it would not significantly impede effective competition on the routes between Austria and Switzerland, namely Vienna-Basel, Vienna-Geneva and Vienna-Zurich.

4.3.   Vienna-Brussels

Vienna-Brussels

| 25. | On the Vienna-Brussels route, some [250 000-300 000] O&D and [350 000-400 000] total passengers travelled in 2008. Besides OS and SN, SkyEurope, a low-cost carrier, operates one daily frequency on this route. SkyEurope does not constitute a strong competitive constraint on the parties. Ryanair’s flights on the Bratislava-Charleroi route cannot be considered as a sufficient competitive constraint on the merged entity. Accordingly, on the Brussels-Vienna route the transaction as initially notified raises serious doubts as to its compatibility with the common market.









  Airline | SS 08 figures | WS 08/09 figures |
| --- | --- | --- | --- |
| Time sensitive | All passengers | Time sensitive | All passengers |
| SN | [0-5] % | [20-30] % | [0-5] % | [20-30] % |
| OS | [50-60] % | [30-40] % | [60-70] % | [40-50] % |
| BMI | [0-5] % | 0 % | [0-5] % | [0-5] % |
| Combined | [50-60] % | [50-60] % | [60-70] % | [60-70] % |
| SkyEurope | [40-50] % | [40-50] % | [30-40] % | [30-40] % |
| Source: Estimates of the parties on the basis of MIDT data. The market share of the parties for SN’s time-sensitive passengers appears considerably underestimated as SN did not offer any business class tickets and SN’s flexible ‘b.flex economy+’ ticket sales are not taken into account in the parties’ estimate, while at the same time the market share of SkyEurope appears highly overestimated given that is has only one daily frequency. |

25.

On the Vienna-Brussels route, some [250 000-300 000] O&D and [350 000-400 000] total passengers travelled in 2008. Besides OS and SN, SkyEurope, a low-cost carrier, operates one daily frequency on this route. SkyEurope does not constitute a strong competitive constraint on the parties. Ryanair’s flights on the Bratislava-Charleroi route cannot be considered as a sufficient competitive constraint on the merged entity. Accordingly, on the Brussels-Vienna route the transaction as initially notified raises serious doubts as to its compatibility with the common market.

Vienna-Brussels

Airline

SS 08 figures

WS 08/09 figures

Time sensitive

All passengers

Time sensitive

All passengers

SN

[0-5] %

[20-30] %

[0-5] %

[20-30] %

OS

[50-60] %

[30-40] %

[60-70] %

[40-50] %

BMI

[0-5] %

0 %

[0-5] %

[0-5] %

Combined

[50-60] %

[50-60] %

[60-70] %

[60-70] %

SkyEurope

[40-50] %

[40-50] %

[30-40] %

[30-40] %

Source: Estimates of the parties on the basis of MIDT data. The market share of the parties for SN’s time-sensitive passengers appears considerably underestimated as SN did not offer any business class tickets and SN’s flexible ‘b.flex economy+’ ticket sales are not taken into account in the parties’ estimate, while at the same time the market share of SkyEurope appears highly overestimated given that is has only one daily frequency.

Source:

4.4.   Vienna-London

Vienna-London

| 26. | The transaction does not raise serious doubts as to its compatibility with the common market as it would not significantly impede effective competition on the Vienna-London route. |
| --- | --- |

26.

The transaction does not raise serious doubts as to its compatibility with the common market as it would not significantly impede effective competition on the Vienna-London route.

4.5.   Direct-indirect and indirect-indirect overlaps

Direct-indirect and indirect-indirect overlaps

| 27. | The transaction does not raise serious doubts as to its compatibility with the common market as it would not significantly impede effective competition on any routes with direct-indirect or indirect-indirect overlaps between the parties. |
| --- | --- |

27.

The transaction does not raise serious doubts as to its compatibility with the common market as it would not significantly impede effective competition on any routes with direct-indirect or indirect-indirect overlaps between the parties.

5.   Conclusion

Conclusion

| 28. | In view of all these circumstances, the Commission concluded that the concentration, as originally notified raises serious doubts as to its compatibility with the common market because it would likely lead to a significant impediment to effective competition on the Vienna-Stuttgart, Vienna-Cologne, Vienna-Munich, Vienna-Frankfurt and Vienna-Brussels routes. The transaction does not raise competition concerns on the other affected routes. |
| --- | --- |

28.

In view of all these circumstances, the Commission concluded that the concentration, as originally notified raises serious doubts as to its compatibility with the common market because it would likely lead to a significant impediment to effective competition on the Vienna-Stuttgart, Vienna-Cologne, Vienna-Munich, Vienna-Frankfurt and Vienna-Brussels routes. The transaction does not raise competition concerns on the other affected routes.

F.   Other affected markets

Other affected markets

| 29. | With respect to horizontally affected markets for the air transport of cargo and for the sale of airline seats to tour operators, the Commission concluded that the proposed transaction does not significantly impede effective competition on any of these markets. |
| --- | --- |

29.

With respect to horizontally affected markets for the air transport of cargo and for the sale of airline seats to tour operators, the Commission concluded that the proposed transaction does not significantly impede effective competition on any of these markets.

| 30. | With respect to vertically affected markets for maintenance, repair and overhaul (MRO) services, in-flight catering, and ground handling services, the Commission concluded that the proposed transaction does not significantly impede effective competition on any of these markets. |
| --- | --- |

30.

With respect to vertically affected markets for maintenance, repair and overhaul (MRO) services, in-flight catering, and ground handling services, the Commission concluded that the proposed transaction does not significantly impede effective competition on any of these markets.

G.   Impact of State aid granted to OS on effective competition

Impact of State aid granted to OS on effective competition

| 31. | OS is currently encountering financial difficulties. On 19 January 2009, the Commission approved rescue aid in the form of a 100 % guarantee on a loan amounting to EUR 200 million for OS. Parallel to the assessment of the transaction under the Merger Regulation, the Commission has assessed the conditions of LH’s intended acquisition of Austria’s shareholding in OS and a EUR 500 million capital increase, which ÖIAG intends to provide to OS, under the State aid rules of the Treaty. |
| --- | --- |

31.

OS is currently encountering financial difficulties. On 19 January 2009, the Commission approved rescue aid in the form of a 100 % guarantee on a loan amounting to EUR 200 million for OS. Parallel to the assessment of the transaction under the Merger Regulation, the Commission has assessed the conditions of LH’s intended acquisition of Austria’s shareholding in OS and a EUR 500 million capital increase, which ÖIAG intends to provide to OS, under the State aid rules of the Treaty.

H.   Proposed commitments

Proposed commitments

| 32. | LH submitted commitments to offer slots, free of charge, within 20 minutes of the requested time, at the airports in Vienna, Stuttgart, Cologne, Munich, Frankfurt and Brussels on each of the five routes on which the Commission identified serious doubts (Identified City Pairs): up to three frequencies per day on the Vienna-Stuttgart route, up to three frequencies per day on the Vienna-Cologne route (but not more than 18 frequencies per week), up to four frequencies per day on the Vienna-Munich route, up to five frequencies per day on the Vienna-Frankfurt route, and up to four frequencies per day on the Vienna-Brussels route (but not more than 24 frequencies per week). Existing slots of competitors may be counted against the number of slots to be made available. |
| --- | --- |

32.

LH submitted commitments to offer slots, free of charge, within 20 minutes of the requested time, at the airports in Vienna, Stuttgart, Cologne, Munich, Frankfurt and Brussels on each of the five routes on which the Commission identified serious doubts (Identified City Pairs): up to three frequencies per day on the Vienna-Stuttgart route, up to three frequencies per day on the Vienna-Cologne route (but not more than 18 frequencies per week), up to four frequencies per day on the Vienna-Munich route, up to five frequencies per day on the Vienna-Frankfurt route, and up to four frequencies per day on the Vienna-Brussels route (but not more than 24 frequencies per week). Existing slots of competitors may be counted against the number of slots to be made available.

| 33. | On the Vienna-Frankfurt and Vienna-Munich routes, Niki shall be able to exchange its current slots for slots at different times, and on the Vienna-Frankfurt route, it shall be entitled to acquire grandfathering rights for the slots it currently leases from LH. The proposed commitments provide also for a slot allocation procedure that facilitates the schedule planning of new entrants. The new entrant (except for Star Alliance members as new entrants) will obtain grandfather rights over the slots once it has operated on the relevant Identified City Pair(s) during two full consecutive IATA Seasons except for the Vienna-Frankfurt route, on which the operation during eight consecutive IATA seasons is required. The commitments further offer a new entrant the possibility to enter into a special prorate and code-share agreement allowing it to place its codes on flights with a true origin and destination in either Austria, Germany and/or Belgium, provided that part of the journey involves the Identified City Pairs; and the possibility to conclude interlining and intermodal agreements, as well as frequent flyer programme access agreements. |
| --- | --- |

33.

On the Vienna-Frankfurt and Vienna-Munich routes, Niki shall be able to exchange its current slots for slots at different times, and on the Vienna-Frankfurt route, it shall be entitled to acquire grandfathering rights for the slots it currently leases from LH. The proposed commitments provide also for a slot allocation procedure that facilitates the schedule planning of new entrants. The new entrant (except for Star Alliance members as new entrants) will obtain grandfather rights over the slots once it has operated on the relevant Identified City Pair(s) during two full consecutive IATA Seasons except for the Vienna-Frankfurt route, on which the operation during eight consecutive IATA seasons is required. The commitments further offer a new entrant the possibility to enter into a special prorate and code-share agreement allowing it to place its codes on flights with a true origin and destination in either Austria, Germany and/or Belgium, provided that part of the journey involves the Identified City Pairs; and the possibility to conclude interlining and intermodal agreements, as well as frequent flyer programme access agreements.

I.   Assessment of the proposed commitments

Assessment of the proposed commitments

| 34. | The commitments submitted by the Parties constitute a comprehensive package which takes into consideration past experience with remedies in merger cases in the aviation sector. The commitments take account of the fact that slot congestion is an important entry barrier on the problematic routes in this case. In light of this, they are designed to remove this barrier and foster entry on the routes where competition concerns have been identified. |
| --- | --- |

34.

The commitments submitted by the Parties constitute a comprehensive package which takes into consideration past experience with remedies in merger cases in the aviation sector. The commitments take account of the fact that slot congestion is an important entry barrier on the problematic routes in this case. In light of this, they are designed to remove this barrier and foster entry on the routes where competition concerns have been identified.

| 35. | The commitments were market tested with customers and competitors of the parties and other market participants. The large majority of respondents to the market test confirmed that the proposed commitments would overall sufficiently facilitate entry or expansion on the Identified City Pairs and would solve the competition concerns raised by the proposed concentration. Three respondents to the market test replied that they would consider entry into the Identified City Pairs. The Commission concluded that the commitments are likely to lead to entry or expansion by one or several airlines on the Identified City Pairs in a timely manner, and thereby constrain the merged entity and remove the serious doubts identified. |
| --- | --- |

35.

The commitments were market tested with customers and competitors of the parties and other market participants. The large majority of respondents to the market test confirmed that the proposed commitments would overall sufficiently facilitate entry or expansion on the Identified City Pairs and would solve the competition concerns raised by the proposed concentration. Three respondents to the market test replied that they would consider entry into the Identified City Pairs. The Commission concluded that the commitments are likely to lead to entry or expansion by one or several airlines on the Identified City Pairs in a timely manner, and thereby constrain the merged entity and remove the serious doubts identified.

J.   Conclusion

Conclusion

| 36. | The concentration as originally notified would significantly impede effective competition in the common market or in a substantial part of the common market. The notifying party, however, submitted a set of remedies to remove the competition concerns identified. The Commission therefore concluded that the concentration as modified by the commitments would not lead to a significant impediment to effective competition, subject to the implementation of the commitments submitted by the notifying party. |
| --- | --- |

36.

The concentration as originally notified would significantly impede effective competition in the common market or in a substantial part of the common market. The notifying party, however, submitted a set of remedies to remove the competition concerns identified. The Commission therefore concluded that the concentration as modified by the commitments would not lead to a significant impediment to effective competition, subject to the implementation of the commitments submitted by the notifying party.

| 37. | Consequently, the concentration is compatible with the common market and the functioning of the EEA Agreement pursuant to Article 8(2) of the Merger Regulation and Article 57 of the EEA Agreement, subject to compliance with the commitments set out in the Annex to the Commission’s Decision. |
| --- | --- |

37.

Consequently, the concentration is compatible with the common market and the functioning of the EEA Agreement pursuant to Article 8(2) of the Merger Regulation and Article 57 of the EEA Agreement, subject to compliance with the commitments set out in the Annex to the Commission’s Decision.

---

(1)  OJ L 24, 29.1.2004, p. 1.

1

(2)  Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJ L 1, 4.1.2003, p. 1).

2

---