UPDATE:EU Deepens Antitrust Probe Into Lufthansa/Austrian Deal
July 01 2009 - 3:41PM
Dow Jones News
The European Commission on Wednesday launched an in-depth
investigation into Lufthansa AG's (LHA.XE) plan to buy Austrian
Airlines AG (AUA.VI).
The commission deepened the probe amid worries that, unchecked,
the merger could lead to higher fares and reduced choices for
consumers on certain routes. The commission said that in the
"absence of appropriate remedies," it had "serious doubts" whether
the deal could be allowed.
Despite the concerns, Europe's antitrust chief, Neelie Kroes,
said she hopes that "in a spirit of mutual cooperation, we will be
able to work closely with Lufthansa in the coming weeks to find
timely solutions to these concerns."
The commission's initial probe found that the deal raised
competition issues on the routes from Vienna to Frankfurt, Munich,
Stuttgart, Cologne, Zurich, Geneva and Brussels.
Although remedies have already been proposed that significantly
reduced the problems, they "were not sufficient to allow the merger
to be cleared at this point in time," the commission said.
The commission now has up to 90 days to decide whether to allow
or block the deal.
The deal with Lufthansa is seen as key to maintaining the
solvency of Austrian Airlines, which has been hit hard over the
last year, first by soaring oil prices and then the global economic
crisis.
Lufthansa is proposing to pay EUR4.49 a share for Austrian
Airlines' outstanding shares. The takeover will also receive help
from the Austrian government in the form of EUR500 million in
restructuring aid, which is being scrutinized by the commission
separately.
This deal was straightforward enough that the airlines should
have been able to get clearance in phase one, said one
Brussels-based lawyer with interest in the case. "It is likely that
the merger probe has been extended due to hiccups in getting
clearance to the state aid," he added.
In a sensitive case, where national politics are heavily
involved, the commission likes to keep its decision's clean,
closing all possible investigations at the same time, Brussels
lawyers say.
The German airline said the commission's launch of an in-depth
probe comes as a surprise, against the background of both airlines'
long-term joint venture, but that it "remains confident to receive
the necessary approvals with justifiable remedies."
-By Peppi Kiviniemi, Dow Jones Newswires; +32 (0)2 741 1 483;
peppi.kiviniemi@dowjones.com