ITA And Lufthansa Might Freeze Fares To North America To Seal Merger Deal

In what is the latest update of the ITA Airways-Lufthansa merger saga, the two airlines have reportedly put forth a number of concessions that they intend to follow to ease the European Commission’s concerns over the deal. Last year, Lufthansa announced its intention to purchase a 41% stake in the Italian national airline and eventually take full control, a move that would mean additional consolidation in Europe.

While nothing official has been released, it is understood that the airlines held a meeting with the European Commission’s antitrust authority on Friday. The main objective of the meeting is to discuss the sacrifices Lufthansa is prepared to make should the merger be approved, as outlined in its Statement of Objections, which was sent to Brussels in late March.

Freezing fares

As part of the concessions, sources tell the Italian daily Corriere della Sera that the airlines are prepared to freeze fares on services between Italy and North America. In other words, the carriers would be limited in their ability to adjust prices, a move that is supposedly offset in their eyes by the benefits of the merger overall. It is not clear how long the move will last.

While generally beneficial for passengers, it could weaken ITA Airways’ position in the market, which has seen a lot of growth from the Italian airline in recent months. Just this month, the carrier inaugurated flights between Chicago O’Hare and Rome Fiumicino with its A330-900neos. The carrier also operates to destinations such as New York (JFK), Boston (BOS) and Los Angeles (LAX) to name a few.

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Milan Linate, competition concerns and European adjustments

Freezing fares is one of many measures that an airline can take in the event of competition antitrust concerns. Others include ceding airport slots, traffic rights, and, in some cases, even aircraft to rivals to facilitate their growth.

Indeed, ITA Airways has proposed a number of remedies per Corriere. This includes ceding traffic rights on select routes and a “substantial” amount of slots at the overcrowded central Milan Linate Airport. In addition, short-haul routes from Rome and Milan could also be slashed or adjusted in order to facilitate the entrance of another competitor in the market. This includes services from Milan to Düsseldorf, Frankfurt, Hamburg and Stuttgart. Meanwhile, from Rome, this includes flights to Frankfurt, Munich, Zurich, and Hamburg.

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Lufthansa Reportedly Threatens To Withdraw From ITA Purchase Over EU Concerns

In a statement to Simple Flying, Lufthansa says it is nevertheless confident that “the Merger Application will be approved”.

The European Commission’s concerns

Back in late March, Simple Flying noted that there were 39 routes of concern in the Lufthansa-ITA merger, per Italian media. This heavily affected services on the intercontinental side, with services to the United States, Canada and Japan all points of contention for Europe’s antitrust authority.

Photo: Leonard Zhukovsky | Shutterstock.

At the time of the release of the Statement of Objections, a Lufthansa Group spokesperson told Simple Flying:

“In order to conclude the planned acquisition of shares in ITA Airways in due course, the Lufthansa Group will continue to work closely and constructively with the EU Commission for a swift conclusion and for the subsequent implementation of the transaction. The company continues to firmly believe that the Merger Application will be approved after the in-depth examination.”

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