Olympic Air and Aegean Airlines deal to be investigated by EC under the EU merger regulation

Brussels, 23-4-2013 — /europawire.eu/ — The European Commission has opened an in-depth investigation under the EU Merger Regulation into the proposed acquisition of Olympic Air by Aegean Airlines. The companies are the two main Greek airlines offering passenger air transport services on Greek domestic and international routes. Each of the companies operates a base at Athens International Airport. The Commission has concerns that the transaction may lead to price increases and poorer service on several domestic Greek routes out of Athens, where the merged entity would have a monopoly or an otherwise strong market position. The opening of an in-depth inquiry does not prejudge the outcome of the investigation. The Commission now has 90 working days, until 3 September 2013, to take a decision on whether the proposed transaction would significantly impede effective competition in the European Economic Area (EEA).

Commission Vice President in charge of competition policy Joaquín Almunia said: “We have the duty to ensure that Greek passengers and people visiting Greece can travel at competitive air fares, even more so during challenging economic times.”

The Commission’s initial market investigation indicated that the proposed transaction raises serious competition concerns on a number of Greek domestic routes where Aegean and Olympic currently compete or are well placed to compete. These routes are used not only by Greek passengers, but also by a large number of foreign travellers, given the popularity of Greece as a tourist destination.

The Commission’s assessment takes account of relevant factors, such as the state of the Greek economy and the financial situation of the parties. However, the investigation so far showed that the proposed acquisition would give the merged entity a monopoly on the routes from Athens to Chania, Santorini, Mytilene, Corfu, Alexandroupolis and Kos, to the detriment of ticket prices and service level offered to passengers travelling on these routes. On other Greek domestic routes where both airlines operate alongside Cyprus Airways (i.e. from Athens to Thessaloniki, Heraklion and Rhodes), the transaction would remove an important competitor.

Moreover, the Commission’s investigation provided indications that the two airlines’ largest competitor, Cyprus Airways, may not continue to act as a viable competitive force on the Greek domestic market in the future. Finally, the Commission’s initial market investigation revealed no indications of entry prospects that would occur on a scale and within a timeframe capable of constraining the merged entity and disciplining its pricing behaviour.

The commitments proposed by Aegean during the preliminary investigation did not address these serious competition concerns.

The Commission will now investigate the proposed acquisition in-depth to determine whether its initial concerns are confirmed or not.

Background

On 26 January 2011, the Commission prohibited the first proposed combination of Olympic Air and Aegean Airlines in case M.5830 (see IP/11/678) In that case, the Commission found competition concerns on 10 Greek domestic routes out of Athens, with a quasi-monopoly on nine of these routes and a loss of potential competition on one route. As part of its current investigation, the Commission is examining the changes in the market circumstances that have occurred since the 2011 decision.

Aegean is a Greek airline providing air transport of passengers and, to a more limited extent, cargo services. Since 1999, Aegean has been offering scheduled flights on Greek domestic routes and international short-haul routes. It operates a base at Athens International Airport. It currently serves approximately 53 international and domestic short-haul destinations. Aegean is a member of the Star Alliance.

Olympic is a Greek airline active in air transport of passengers and cargo. Like Aegean, Olympic operates a base at Athens International Airport and currently serves approximately 45 short-haul destinations, mainly within Greece. Olympic does not belong to any airline alliance.

Merger control rules and procedures

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (phase I) or to start an in-depth investigation (phase II).

There are currently three other on-going phase II merger investigations. The first one examines the proposed combination of Munksjö and the European label and processing business of Ahlstrom, in the paper industry (see IP/12/1338), with a deadline on 7 June 2013. The second phase II investigation concerns the proposed acquisition of a roaming technologies company Mach by its rival Syniverse (see IP/12/1439), with a deadline on 30 May 2013. The last ongoing phase II investigation was opened in March into the proposed acquisition of Shell’s Harburg refinery assets by Nynas of Sweden (see IP/13/290). The deadline here is 6 September 2013.