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Brussels, 22nd December 2005

Mergers: Commission clears planned acquisition of control over Eurowings by Lufthansa, subject to conditions

The European Commission has cleared under the EU Merger Regulation the proposed acquisition of control by German airline Deutsche Lufthansa AG over the German airline Eurowings Luftverkehrs AG and its subsidiary, the low cost airline Germanwings. The Commission's clearance is conditional upon the parties surrendering slots at Vienna and Stuttgart airports and other concessions. In light of these commitments, the Commission has concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or a substantial part of it.

Competition Commissioner Neelie Kroes commented " the Commission has ensured that other carriers will be able to offer services in competition with the merged company. This was essential because, with this transaction, Lufthansa will acquire control over a low cost airline for the first time, and low cost airlines provide important competition on some routes",

Lufthansa is the principal airline in Germany and provides air transport of persons, cargo and related services. It is a member of the Star Alliance of airlines. Lufthansa recently acquired the airline Swiss (see IP/05/837). Eurowings currently offers scheduled low cost air services and related services through its 100% subsidiary Germanwings. It operates from Cologne/Bonn, Stuttgart and Berlin-Schönefeld airports and, as of the beginning of the winter season 2005/2006, from Hamburg.

Lufthansa already owns a 49% shareholding in Eurowings but currently Lufthansa is not able to determine the strategic commercial behaviour of Eurowings and Germanwings. Lufthansa and Eurowings intend to sign an agreement whereby Lufthansa will acquire the majority of the voting rights in, and sole control of, Eurowings and Germanwings.

Lufthansa, as a network carrier, and Germanwings, as a low cost airline, operate with different business strategies. Nevertheless, they are perceived as competitors by time-sensitive and non-time sensitive passengers alike. The Commission's investigation showed that the proposed acquisition by Lufthansa of Eurowings would eliminate competition on three intra-European routes, i.e. Cologne/Bonn-Vienna, Stuttgart-Vienna and Stuttgart-Dresden. In reaching this conclusion the Commission also took into account the impact of Lufthansa's close co-operation with Austrian Airlines, which is also a member of the Star Alliance.

To address the Commission’s concerns, the parties have committed to surrender slots at the airports of Vienna and Stuttgart. This creates the conditions for competing airlines to emerge on the affected routes. Furthermore, the parties are offering additional commitments, such as for example allowing competitors to participate with their flights on the affected routes in Lufthansa’s Frequent Flyer Programme with the aim of making entry more attractive.

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