25 September 2015

European Commission publishes its decision on IAG acquisition of Aer Lingus

On 14 July 2015, the European Commission (the Commission) approved the acquisition of Aer Lingus by International Consolidated Airlines Group (IAG), holding company of British Airways, Iberia and Vueling, subject to compliance with the commitments offered by the parties. On 18 September 2015, the Commission published its decision, which sets out its considerations and conclusions in full.

The Commission feared that the merged entity, as originally notified, would have high market shares on the Dublin-London, Belfast-London and Dublin-Chicago routes, leading to a lack of competition and consequently higher prices. To address this concern, IAG has committed to release five of its daily take-off and landing slots at London-Gatwick (representing 14% of IAG and Aer Lingus’ daily flights) which can be used by IAG's competitors on these routes. This has the effect of reducing the merged entity’s share of available slots and of the overall number of flights taking off and landing at London-Gatwick.

The Commission also raised concerns about the impact the merger would have on Aer Lingus’s role in distributing connecting passengers to some of IAG's competitors, which supply long haul flights. The Commission identified that there was a risk that, post-acquisition, IAG would be able to affect the level of customers of its competitors by increasing the price, or reducing the number of short haul flights available to connect passengers to competing long haul flights. This could then drive up competitors’ prices for long haul flights. IAG has therefore committed to contract with competing airlines in relation to the connecting flights where the Commission has recognised this foreclosure risk.

The Commission is comfortable that the commitments offered by the parties sufficiently facilitate the entry of competitors so as to eliminate the serious concerns highlighted at the Phase I investigation stage and has therefore cleared the acquisition under Articles 6(1)(b) and 6(2) of the Merger Regulation.

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