For only the third time in six years, the Commission has prohibited a proposed merger.
On 26 January 2011, the Commission blocked the proposed merger between Olympic Air and Aegean Airlines (under Article 8(3) of the EU Merger Regulation) as it would have resulted in a quasi-monopoly on the Greek air transport market. This would have led to higher fares for four out of six million Greek and European consumers travelling on routes to and from Athens each year (between Athens and Thessaloniki, the country's second-biggest city, and between Athens and eight island airports).
Together the two carriers control more than 90% of the Greek domestic air transport market and the Commission's investigation showed no realistic prospect that a new airline of a sufficient size would enter the routes to restrain the merged entity's pricing. The investigation also showed that ferry services do not generally constitute a sufficiently close substitute to air services so as to discipline the merged entity's pricing behaviour.
Although the parties offered to divest slots at the relevant Greek airports, the Commission decided that such a remedy would not be sufficient to resolve its competition concerns as there is no shortage of availability of slots in Greece - unlike the congestion observed at other European airports in previous mergers or alliances. The Commission, therefore, concluded that the proposed merger would significantly impede effective competition in the EEA or a substantial part of it.
This is the first merger prohibited by Competition Commissioner Joaquín Almunia. Commissioner Almunia noted that the Commission had done its best to find a solution, "but unfortunately the remedies offered by the companies would not have adequately protected the interests of the four million consumers that use the routes."
The Commission has examined 11 mergers and many alliances in the airline sector since the EUMR came into effect in 2004 and this is only the second negative prohibition in the sector. The first, in 2007, related to the proposed acquisition of Aer Lingus by Ryanair.
It is notable that all three of the mergers that have been blocked in the last 6 years were mergers of close competitors on their domestic, national, markets.
To view Community Week, Issue 506; 28th January 2011 in full, Click here.
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