Lessons to Learn from Airline Mergers

By: Kaya Ricken (Antitrustpolitics.com)

The airline industry operates on an international scale, impacting many geographic markets. Specific remedies have frequently been required for approving airline mergers in recent years. Notable cases under review or recently concluded include Lufthansa’s acquisition of ITA, Korean Air’s acquisition of Asiana Airlines, and IAG’s proposed acquisition of Air Europa.

A common remedy in airline mergers is slot divestment. This involves airlines selling some of their take-off and landing slots at various airports to competitors. The rationale behind this remedy is that slots are a primary barrier to market entry. By divesting slots, new competitors can enter the market, fostering competition.

A landmark case of slot divestment dates back to 2004 when the European Commission approved the merger between Air France and KLM. This merger came with significant commitments, including the divestment of 47 pairs of slots (94 single take-off and landing slots) per day. The Commission believed that these commitments would allow competitors to use these slots, ensuring that passengers benefited from a choice of services and competitive prices. This was the first instance where slot surrender was for an unlimited duration, with unused slots returned to the slot coordinator rather than to the airline partners. Additionally, measures were put in place by regulators to prevent the airlines from obstructing new entrants from establishing themselves as competitors…

CONTINUE READING…