Ita Airways and Lufthansa have signed preliminary agreements with the British easyJet and the Spanish Volotea to allow the two low-cost carriers to start short-haul connections between Milan Linate, Rome Fiumicino and central Europe to bring competition back to the routes where weddings Italian-German forces would give rise to a monopoly. This is what the Corriere has learned from three EU sources familiar with the contents of the latest package of “remedies” that Rome and Frankfurt sent to Brussels to get the Antitrust’s green light for the union in the skies.
In Milan and Rome
With the two agreements – which will have to be finalized and can only become effective after the EU’s approval of the proposal – the “remedy takers” easyJet and Volotea will be able to open a base at Linate, each basing a couple of planes, the sources continue. While the Spanish company should position another two aircraft in Fiumicino, thus inaugurating a further base also in the main Italian airport. The agreement with Volotea also came to fruition because Wizz Air, initially interested, asked for a high number of slots at Linate. Lufthansa, Tesoro and Ita did not comment.
The remedies
At 11.58pm on Monday 6 May – just two minutes before the deadline – Lufthansa and the Ministry of Economy sent the Antitrust “an improved corrective offer compared to the previous one to obtain the green light for the investment in Ita”, the European sources continue. “The revised package addresses the Commission’s concerns about short- and long-haul routes, as well as a concentration at Milan Linate airport,” comments the German group, adding that “the deadline for the Commission’s decision on the review has been automatically moved to July 4th.”
The slots to be released
In the revised document, Ita and Lufthansa say they are willing to give up 12 daily pairs of slots at Linate – i.e. 24 flights in both directions -, one more than the 11 initially planned, as reported exclusively by Corriere. Six couples should go to easyJet, another six to Volotea. It will be up to the two low cost companies to choose which take-off and landing time slots to take from Ita and Lufthansa – those in the morning and late afternoon are the most precious – using them however only to guarantee connections between Milan and the German giant’s hubs in Europe, such as Linate-Brussels.
In the capital
At Fiumicino – an airport where there are fewer short-haul competition problems and there is no shortage of free slots – Ita and Lufthansa intend to sell at least 6 pairs, equal to 12 daily flights, sources calculate: in this context, the negotiations see Volotea benefit from the release of take-off and landing rights, so as to park two more of its Airbuses. The slot pairs could also increase to 9 to allow the positioning of another aircraft. Volotea would enter the connection with Munich. Ryanair is also hot in Rome and would like other slots but at the times it deems best. At the moment – as anticipated in recent days – the preliminary agreements provide that the two low cost companies guarantee the service for at least 3 years. While Ita would have committed not to launch some routes which would then become a monopoly such as Linate-Vienna.
Intercontinental flights
The other major issue, that of the intercontinental routes between Rome and North America, sees in the package of remedies a confirmation of what was anticipated: Lufthansa guarantees to keep the commercial activities of Ita separate from those of A++, the joint transatlantic venture that the Germans have with United Airlines and Air Canada. This means that there will continue to be competition on flights with the USA and Canada. A “monitoring trustee” will monitor the correct application of the agreement. In the meantime, ITA – after the possible EU green light – will be able to move from the SkyTeam alliance to the Star Alliance. It remains to be seen – continue the European sources – whether the Italian company will be able to start codeshare flights with United and Air Canada which in theory would not require antitrust authorisation.
The alliances
In the months following Lufthansa’s entry into Italy – initially with 41%, then rising to 90 and 100% – the Germans and Italians will be able to start the process for the Italian carrier’s entry into the transatlantic joint venture. It will take at least 18 months to get the approval which will be conditional on the approvals of three regulatory authorities (European, US and Canadian) and the granting of further remedies. In this context, the Italian-German orientation is to sign “SPAs” (special prorate agreements) with rival carriers – such as Air France, KLM, British Airways and Iberia – so as to reduce EU concerns about competition on long-haul connections .
The position of Brussels
Will all this be enough to get the EU approval for the Ita-Lufthansa wedding? The EU Antitrust does not expose itself, having to first make its own assessments and then carry out “market tests” (with the contribution of rival airlines) on the remedies proposed by the Italians and Germans. But Margrethe Vestager, European Commissioner for Competition, told “Politico” that «if the serious competition problems cannot be resolved» in the Ita-Lufthansa operation «we cannot approve the transaction. It is up to companies to find remedies for these competitive risks.”
