Air Berlin takeover under European Commission scrutiny

At the beginning of November, both Lufthansa and easyJet notified the European Commission of their plan to acquire assets from Air Berlin under the EU Merger Regulation.

Last August Air Berlin filed for bankruptcy. It was granted rescue aid by the German State in the form of a loan of EUR 150 million to prevent the disruption of its flights. On 15 August 2017, the European Commission was formally notified of the aid and approved it on 4 September 2017 in accordance with its guidelines on State aid for rescuing and restructuring troubled non-financial undertakings.

The proposed transaction with easyJet includes some of Air Berlin’s operations at Berlin Tegel airport and, specifically, leases for up to 23 A320 aircraft and some 1,000 pilots and cabin crew. Lufthansa has confirmed plans to take over Niki, Air Berlin’s Austrian holiday airline, and regional carrier LGW, as well as 20 other aircraft (81 aircraft in total) and over 3,000 staff.

The Commission is now assessing whether these transaction raise concerns under competition law as they may or may not significantly impede effective competition in the EU or a substantial part of it. If the Commission finds that the buyers of the assets were chosen according to the economically most advantageous bidder at the end of an open and non-discriminatory tender process, the rescue aid will not have to be repaid.

At the time, the rescue aid was challenged before the Commission by Ryanair, Germania and an anonymous plaintiff, but their arguments were rejected. It is likely that the transactions that are now under examination will now also be challenged by the same competitors under the EU Merger Regulation.

If the Commission finds there are serious concerns about a potential restriction of competition in the German market (the Commission’s assessment is made route by route) and if Lufthansa does not propose commitments addressing those concerns, the Commission may open an in-depth investigation, extending the case by a further 90 working days.

Otherwise, the European Commission must announce its decision by 7 December 2017, but this deadline may be extended by 10 working days if commitments are offered by Lufthansa. In practice, the Commission is expected to announce its decision on the easyJet/Air Berlin case by 12 December 2017.