On 26 January 2011, the European Commission blocked the proposed merger between Greek air carriers Aegean Airlines and Olympic Air, ruling that the merger would have led to a "quasi-monopoly" on the domestic air transport market.
On 24 June 2010, the main shareholders of Aegean Airlines and Olympic Air notified to the Commission the proposed acquisition of joint control over a newly-formed company containing the businesses of the two former airlines. On 30 July 2010, the Commission opened a Phase II investigation on the grounds that the proposed merger raised serious competition concerns.
The Commission found that the proposed merger would not raise significant concerns on the short-haul international routes operated by the two airlines but would give rise to a near monopoly on nine domestic routes. The Commission dismissed the argument put forward by the merging parties that the Greek market was too small to sustain two independent airlines, which contradicted their assertion that the merged entity would be constrained by the threat of entry into the Greek domestic routes by a number of potential entrants. The Commission also rejected the argument that ferries compete with airlines on eight of the nine domestic routes.
The parties proposed (by way of remedies) to release take-off and landing slots at relevant airports as well as to give access to their frequent flyer programmes and interlining arrangements. Following market testing, the Commission dismissed the release of slots as an acceptable remedy, noting that there was no shortage of slots at the airports concerned.
In the absence of an appropriate remedy offer, the Commission decided to block the proposed merger on the grounds that there were "no realistic prospects" of a credible airline entering the domestic routes concerned and competing with the merged company.
The Commission has examined 11 airline mergers since the adoption of the current EU Merger Regulation in 2004. This is the second airline merger prohibition, the first being the Ryanair/Aer Lingus case in 2007. Both cases concerned a merger of two national airlines based at the same "home" airport in the national capital. This is the first merger between Greek companies that has been prohibited (or even examined under a Phase II investigation) by the Commission.
The decision demonstrates that, in appropriate cases, the Commission remains prepared to prohibit mergers, despite the current economic conditions (which was one of the parties' justifications for the deal). However, thisis the first merger that the Commission has blocked since Ryanair/Aer Lingus (see above). The case also shows that remedies offered must be designed to resolve the competition problems identified; the Commission (or any other competition authority) will always carefully analyse whether this is the case.
Please click on the links below for the other articles in the February 2011 competition newsletter
- Commission publishes horizontal guidelines
- €38m fine on E.ON for breaking Commission seal upheld
- A sigh of relief for UK employees: Employers cannot sue employees who infringe competition law
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