CELEX: 32015M7766
Language: en
Date: 2015-11-17 00:00:00
Title: Commission Decision of 17/11/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7766 - HNA GROUP / AGUILA) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 17.11.2015
C(2015) 8184 final

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|To the notifying party:                                                |                                                                       |
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Dear Sir/Madam,

Subject:    Case M.7766 - HNA GROUP / AGUILA
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement  on  the  European  Economic
Area[2]

 0. On 15 October 2015, the European Commission received a notification of a proposed concentration pursuant to Article 4 of Council  Regulation
    (EC) No 139/2004 by which HNA Group Co., Ltd. ("HNA Group") will acquire sole control of Aguila 2 S.A., the holding company of the Swissport
    group of companies (together with its subsidiaries, "Swissport", and together  with  HNA  Group,  the  "Parties")  by  way  of  purchase  of
    securities (the "Transaction").

THE PARTIES

 0. Swissport is a provider of airport ground handling, cargo handling, and related ground handling services, to airlines in Europe and  abroad.
    Swissport has around 40 000* employees worldwide and is active at 269 airports in 48 countries. In 2014, Swissport provided ground  handling
    services for approximately 229 million passengers and handled approximately 4.1 million tons of cargo worldwide.

 0. HNA Group is a Chinese conglomerate encompassing core divisions of aviation, holdings, capital, tourism and logistics. The core focus of the
    HNA Group is China and the Asia region, with some limited activities in the EU.  Through  its  HNA  Aviation  division,  HNA  Group  manages
    aviation related enterprises, with a focus on China and the Asia region. HNA Group, through its  controlled  airlines,[3]  is  active  at  a
    number of airports in the EEA.

THE OPERATION AND THE CONCENTRATION

 0. On July 30, 2015, HNA Group and Aguila 1 S.à r.l. entered into a Sale and Purchase Agreement  (the  "SPA"),  pursuant  to  which  HNA  Group
    intends to acquire Aguila 2 S.A. Aguila 2 S.A. is a wholly owned subsidiary of Aguila 1 S.à r.l. and is the holding company of the Swissport
    group of companies.

 0. Pursuant to the SPA, HNA Group intends to acquire all of the interest in Aguila 2 S.A., representing 100%  of  the  issued  and  outstanding
    share capital and voting rights in the company.

 0. The Transaction, therefore, constitutes a concentration within the meaning of Article (1)(b) of the Merger Regulation.

EU DIMENSION

 0. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[4] (HNA Group: EUR  20 700  million;
    Swissport: EUR: 2 408 million). Each of them has an EU-wide turnover in excess of EUR 250  million  (HNA  Group:  EUR  [BUSINESS  SECRETS  –
    TURNOVER] million; Swissport: EUR [BUSINESS SECRETS – TURNOVER ] million), and they do not achieve more than two-thirds of  their  aggregate
    EU-wide turnover within one and the same Member State.

 0. The Transaction, therefore, has an EU dimension pursuant to Article 1(2) of the Merger Regulation.

MARKET DEFINITION

 0. Swissport is primarily active in the provision of ground handling and cargo handling services,[5] while  three  airlines  within  HNA  Group
    (Hainan Airlines, Beijing Capital Airlines and Yangtze River Express) have limited activities in the EEA in air transport services.

1 Ground and cargo handling services

1 Product market definition

 0. In its decisional practice, the Commission has previously distinguished  the  following  product  markets:  (i)  ground  handling  services,
    consisting of ramp, passenger and baggage handling services (which in turn include other services such as airside cargo  handling,  de-icing
    and security services); and (ii) landside cargo handling services (which include among others cargo  terminal  operations,  warehousing  and
    inventory control, cargo security, handling of certain goods or animals and custom clearances).[6]

 0. The Commission has also previously left open whether offline cargo handling[7] constitutes a separate product market, belongs  to  the  same
    market as cargo handling services, or belongs to an overall market for freight forwarding services.[8]

 0. The Notifying Party generally agrees with the Commission's previous definitions of separate markets for ground handling and  landside  cargo
    handling services, with no need to further segment the market by the type of service offered. However, they consider that any definition  of
    the ground handling market should also include self-handling by airlines.

 0. As regards offline cargo handling, the Notifying Party submits  that  the  Commission  can  ultimately  leave  this  point  open  since  the
    Transaction does not raise serious doubts under any plausible market definition

2 Geographic market definition

 0. In its decisional practice, the Commission has previously considered ground handling and landside cargo handling either at a single  airport
    or airports within the same catchment area as the appropriate geographic parameters for these markets. The Commission  has  also  left  open
    the exact geographic market definition for offline cargo handling.[9]

 0. The Notifying Party submits that while the Transaction can be assessed on the basis of either single airports or airports  within  the  same
    catchment area, the Commission can ultimately leave this point open since the Transaction does not raise serious doubts under any  plausible
    market definition.

3 Conclusion

 0. For the purpose of the assessment of the Transaction, the Commission considers that the precise scope of the product and  geographic  market
    definitions for ground handling, landside cargo handling and offline cargo handling services can be left open since the Transaction does not
    raise serious doubts under any plausible market definition.

2 Air transport services

1 Product and geographic market definition

 0. In its decisional practice, the Commission has previously considered the origin/point of destination (O&D) pair approach as the  appropriate
    basis both the relevant product and geographic dimension of the market for the assessment of air transport services.[10]

 0. However, in its assessment of cases where there is only a vertical relationship between on the one hand,  air  transport  service  providers
    and, on the other hand, ground handling, landside cargo handling or offline cargo handling service providers, the  Commission  has  assessed
    the competitive effects of a transaction by reference to the downstream share of purchases of ground handling, landside  cargo  handling  or
    offline cargo handling services by providers of air transport services, without distinguishing by O&D pair operated  by  the  air  transport
    provider.[11]

 0. The Notifying Party submits that there is no need to further segment the market for air transport services on the  basis  of  the  origin  /
    point of destination pair approach.

2 Conclusion

 0. For the purpose of this assessment of the Transaction, the Commission considers that the precise scope of the product and geographic  market
    definition for air transport services can be left open since the Transaction does not  raise  serious  doubts  under  any  plausible  market
    definition.

COMPETITIVE ASSESSMENT

 0. While the Transaction does not give rise to any horizontal overlap  between  Swissport  and  HNA  Group,  it  does  give  rise  to  vertical
    relationships between Swissport and HNA Group, given that Swissport is active in the provision of ground handling, landside  cargo  handling
    and offline cargo handling services, and HNA Group, via its controlled airlines, is a potential purchaser of these services.

1 The Notifying Party's views

 0. Regarding a possible input foreclosure strategy, the Notifying Party submits that the merged entity will have neither the incentive nor  the
    ability to engage in such a strategy, given that HNA Group's controlled airlines account for only a small portion of downstream  demand  and
    any such strategy. Regarding the incentive, such a strategy would result in Swissport foregoing revenues from the vast majority of available
    business. Regarding the ability, there is significant competition on the upstream markets that would materially limit Swissport's ability to
    engage in any such strategy. Moreover, the majority of relevant  services  at  the  affected  airports  are  liberalised[12],  meaning  that
    alternative suppliers are able to establish operations at the affected airports as competitors to Swissport, and to compete for the business
    of HNA Group's downstream rivals, without facing any material regulatory barriers.

 0. As for possible customer foreclosure, the Notifying Party submits that no such concerns will arise because HNA Group  accounts  for  only  a
    minimal share of demand at the airports at which it is active in the EEA, and is therefore unable to foreclose access to  demand  for  these
    services.

2 The Commission's assessment

 0. For the reasons set out below, the Commission considers that the Transaction does not raise serious doubts due to the vertical relationships
    between Swissport and HNA Group.

1 Input foreclosure

 0. First HNA Group is an actual/potential purchaser of Swissport's ground handling, landside cargo handling and offline cargo handling services
    at the following airports in the EEA where Swissport's market shares with respect to the relevant services are above 30%:[13]

        a. for ground handling services: Birmingham ("BHX"), Brussels ("BRU"), and Munich ("MUC"); and

        b. for offline cargo handling services: Berlin Tegel ("TXL"), Berlin Schönefeld ("SXF"), Birmingham ("BHX"), Brussels ("BRU"), Frankfurt
           ("FRA"), and Münich ("MUC").[14]

 0. HNA Group, however, accounts for less than [0–5]% of all purchases of the relevant services at each of these  airports.  The  merged  entity
    will, therefore, not have the incentive to engage in an input foreclosure strategy.

 0. Second, the merged entity will not have the ability to engage in such a strategy.  As confirmed by a majority of respondents that replied to
    the market investigation and expressed an opinion, Swissport faces competition in the supply of ground handling at  each  affected  airport,
    and with respect to offline cargo handling on both a national and airport-specific basis. At least two providers  (including  Swissport)  of
    ground handling or offline cargo handling are present at each affected airport, with additionally certain airlines also  choosing  to  self-
    handle.

 0. Third, a majority of respondents to the market investigation indicated that the  merged  entity  will  have  neither  the  ability  nor  the
    incentive to restrict access to ground handling services, or offline cargo handling  services  respectively,  for  HNA  Group's  competitors
    active in the air transport of passengers or cargo at any of the aforementioned airports.[15]

2 Customer foreclosure

 0. First, the merged entity will have neither the ability nor the incentive to foreclose other providers of  handling  services  as  HNA  Group
    accounts for only a minimal share of demand at the airports at which it is active in the EEA.

 0. Second, a majority of respondents to the market investigation indicated that the merged  entity  will  have  neither  the  ability  nor  the
    incentive to foreclose customers of either ground handling or offline cargo handling services[16].  Moreover,  these  respondents  indicated
    that, in general, the Transaction will have a neutral impact on the operations of ground handlers and offline cargo handlers active at  each
    of the aforementioned airports.[17]

CONCLUSION

 0. For the above reasons, the European Commission has decided not to oppose the notified operation  and  to  declare  it  compatible  with  the
    internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation and  Article
    57 of the EEA Agreement.

For the Commission
(Signed)
Margrethe VESTAGER
Member of the Commission

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[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
('TFEU') has introduced certain changes, such as the replacement of 'Community'  by  'Union'  and  'common  market'  by  'internal  market'.  The
terminology of the TFEU will be used throughout this decision.

[2]   OJ L 1, 3.1.1994, p.3 ("the EEA Agreement").

[3]   HNA Group controls the following airlines: Hainan Airlines, Beijing Capital Airlines, Yangtze River Express, Deer Jet, Ghana  Africa  World
Airlines, Hong Kong Airlines, Hong Kong Express, Lucky Air, Tianjin Airlines and West Airlines. Of these airlines, only Hainan Airlines,  Beijing
Capital Airlines, and Yangtze River Express are active in the EEA. HNA Group also  holds  a  non-controlling  stake  in  Aigle  Azur,  a  French-
headquartered airline. For completeness, HNA Group also holds stakes in the following aviation-related  companies  with  operations  outside  the
EEA: HNA Cargo, Hong Kong Aviation Capital and myCargo. Finally, HNA Group owns and operates an airport management business  focussed  solely  on
airport management services in China.

[4]   Turnover calculated in accordance with Article 5 of the Merger Regulation.

*     [CLERICAL ERROR. SHOULD READ "60 000".]

[5]   Swissport also provides the following additional services: (i) into-plane fuelling; (ii) security services;  (iii)  airport  lounges;  (iv)
catering; (v) maintenance, repair and overhaul; and (vi) executive aviation. None of these services gives rise to any affected  market  and  are,
therefore, not discussed further in the assessment section of this Decision.

[6]   See case M.7021 – Swissport/Servisair, paragraphs 28 and following; case M.6671 – LBO France/Aviapartner, paragraphs 10 and following.

[7]   Offline cargo handling services are services provided for freight that will not be, or was not, loaded at the airport where it is  handled.
Offline services do not necessarily need to be provided at airports (the  cargo  is  handled  and  prepared  for  flight  at  one  airport,  then
transported by truck to another airport for loading onto the aircraft). See case M.7021 – Swissport/Servisair, paragraph 34.

[8]   See cases M.7021 – Swissport/Servisair, paragraph 36; M.6671 – LBO France/Aviapartner, paragraph 47.

[9]   See cases M.7021 – Swissport/Servisair, paragraph 44; M5747 – Iberia/British Airways, paragraph 46;  M.5830  –  Olympic/Aegean,  paragraphs
314 and following.

[10]  See cases M.7541 – IAG/Aer Lingus, paragraphs 14 and following; M.6828 – Delta Air Lines/Virgin Group/Virgin Atlantic  Limited,  paragraphs
17 and following; M.6447 – IAG/bmi, paragraphs 31 and following.

[11]  See cases M.7541 – IAG/Aer Lingus, paragraphs 525 and following; M.7270 – Cesky Aeroholding / Travel Service / Ceske  Aeroline,  paragraphs
111 and following; M.5830 – Olympic/Aegean Airlines, paragraphs 1719 and following.

[12]  There are only two affected airports where ground handling services are not liberalised (Brussels and Munich), and HNA Group  accounts  for
less than [0–5]% of demand for ground handling services at these airports.

[13]  Some competitors of Swissport raised concerns regarding the horizontal effect  of  the  Transaction  on  the  market  for  ground  handling
services. As HNA Group is, however, not active on this market, the Transaction will have no merger-specific effects in this market.

[14]  There are also additional airports in the EEA where Swissport and HNA Group are active: (i) for ground handling services:  Amsterdam;  (ii)
for landside cargo handling services: Amsterdam, Berlin Tegel, Berlin Schönefeld, Birmingham,  Brussels,  Frankfurt,  Munich,  Paris  Charles  de
Gaulle; and (iii) for offline cargo handling services: Amsterdam, Paris Charles  de  Gaulle.  Swissport's  market  shares  with  respect  to  the
relevant services are, however, below 30%.

[15]  Replies to Q1 – Questionnaire to ground handling and offline cargo handling customers, questions 5-6, and questions 9-10; Replies to  Q2  –
Questionnaire to ground handling and offline cargo handling competitors, questions 5-8.

[16]  Replies to Q1 – Questionnaire to ground handling and offline cargo handling customers, questions 5-6, and questions 9-10; Replies to  Q2  –
Questionnaire to ground handling and offline cargo handling competitors, questions 5-8.

[17]  Replies to Q1 – Questionnaire to ground handling and offline cargo handling customers, question  14;  Replies  to  Q2  –  Questionnaire  to
ground handling and offline cargo handling competitors, question 12.

[18]  Replies to Q1 – Questionnaire to ground handling and offline cargo handling customers, question  14;  Replies  to  Q2  –  Questionnaire  to
ground handling and offline cargo handling competitors, question 12.

-----------------------
 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC)  No  139/2004
 concerning non-disclosure of business secrets and other confidential information.  The  omissions  are  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE