OFT Cancels Request for UK Review of Proposed Acquisition by International Airline Group
The OFT has decided not to make a request to the European Commission for a UK review of the proposed acquisition by International Airline Group (IAG) of bmi from Lufthansa.
International Airlines Group S.A. is the parent company of British Airways and Iberia. The European Commission reviewed and approved the merger of these two incumbent national airlines on 14 July 2010. IAG proposes to acquire BMI International, BMI Regional and bmibaby from Lufthansa which acquired these companies in 2009.
The European Commission also reviewed and approved this merger. The transaction was notified to the European Commission on 10 February in accordance with the EU merger control rules. It would bring together two airline companies closely connected to the UK but with networks and services from/to many jurisdictions (including France, Austria, Russia).
The OFT will continue to work closely with the European Commission as it assesses whether the proposed transaction raises competition concerns for airline passengers including those travelling to/from airports in Scotland and the North West of England to London Heathrow as well as the overall competitive position at London Heathrow.
The OFT reached this decision following careful consideration and extensive dialogue with the European Commission. It has concluded that the European Commission would be best placed to consider the deal as:
some of the issues (such as the impact of this acquisition on transfer traffic and on the overall competitive position at London Heathrow) require a comprehensive review of routes across many jurisdictions, not just the UK
the European Commission has extensive expertise in handling airline merger cases and recent experience in merger and antitrust cases involving the merging parties
Sheldon Mills, Director of Mergers said: “The proposed acquisition of bmi by IAG has generated a significant level of concern in the UK especially in Scotland, the North West of England and Northern Ireland. We consider that the transaction should be subject to a careful and detailed review and we will continue to work closely with the European Commission to ensure that UK airline passengers will not lose out through the proposed deal.”
Concentrations with a Community dimension as defined in the EU Merger Regulation (EUMR) must be notified to the European Commission. Community dimension is, in brief, determined by the size of the parties’ turnover involved in the transaction and its geographical spread.
In certain exceptional circumstances, a merger which falls within the jurisdiction of the EUMR may be referred to the UK for examination by the OFT (Article 9 of the EUMR). Further details regarding the referral criteria are set out in chapter 11 of the OFT’s Jurisdictional and Procedural Guidance and in the Commission Notice on case referral in respect of concentrations (2005).
The European Commission has extensive experience of reviewing airline mergers and airline alliances including those with a national impact. In addition to the creation of IAG and the acquisition of BMI by Lufthansa as noted above, the European Commission has also reviewed, among others the following merger cases: Olympic/Aegean Airlines (26 January 2011), Ryanair/Aer Lingus (27 June 2007),KLM/Martinair (17 December 2008), Delta Airlines/Northwest Airlines (6 August 2008); Lufthansa/Austrian Airlines (28 August 2009), Lufthansa/Swiss (4 July 2005), Lufthansa/SN Airholding (22 June 2009). In addition, the European Commission has assessed several antitrust cases in the airline sector, such as case COMP/39.596 BA/AA/IB (14 July 2010).
Any communication or information in relation to this case must be sent to the European Commission case team dealing with this matter.