LH and SN: No deal...

[HighInTheSky]

Just heard the eveningnews at Radio 2, and there was stated that the EU refuses on the takeover of SN by LH...

[brussels airlines]

European commission stated (as we knew) there would be a monopoly on several routes from Brussels to Germany/Switzerland. Their investigation isn't finished yet and they will do some extra investigation the couple weeks. Brussels Airlines was suprised by the news and hopes that the EC will end their investigation soon.

[LX-LGX]

Official EU press release:

Commission opens in-depth investigation into proposed take-over of SN Brussels Airlines by Lufthansa

The European Commission has opened an in-depth investigation under the EU Merger Regulation into the planned acquisition of SN AirHolding (SNAH) of Belgium by Lufthansa of Germany, both active in passenger and cargo air transport. The Commission’s initial market investigation indicated that the proposed acquisition could significantly impede effective competition and so raises serious doubts as to its compatibility with the Single Market, at least as regards passenger air transport on a number of routes between Belgium and Germany and Belgium and Switzerland. The decision to open an in-depth inquiry does not prejudge the final result of the investigation. The Commission now has 90 working days, until 10 June 2009, to take a final decision.

Competition Commissioner Neelie Kroes said “At a time of consolidation in the European airline sector, the Commission must make sure that consumers will continue to have a competitive choice of airline services both as regards fares and routes”..

Lufthansa is a full-service air carrier with hubs at Frankfurt and Munich airports, and a base at Düsseldorf. Lufthansa also controls Swiss International Air Lines Ltd. (Swiss), based at Zurich airport, Air Dolomiti, Eurowings and low-cost carrier Germanwings.

SNAH is the holding company of SN Brussels Airlines, the Belgian commercial airline active in the transport of both passengers and cargo mainly in Europe and some destinations to Africa.

The Commission’s initial investigation found that the proposed transaction would lead to the creation of a monopoly with respect to three routes from Brussels to Frankfurt, Hamburg and Munich and substantially reduce competition on the route from Brussels to Berlin. The investigation also identified competition concerns on two routes between Belgium and Switzerland, namely Brussels-Zurich and Brussels-Geneva.

In order to remove the identified competition concerns, Lufthansa proposed remedies on 5 January 2009. However, the Commission found that these remedies were not sufficiently clear-cut to remove the serious doubts identified in its first phase investigation. More information on the case is available at
http://ec.europa.eu/competition/mergers ... tml#m_5335

- - -

Source = EU press service
http://europa.eu/rapid/pressReleasesAct ... =IP/09/129

[HighInTheSky]

So there is still hope!

[brussels airlines]

I hope the commission wont wait till 10 June, because time is money, defenitly in these times and in this industry!

[brusselsairlinesfan]

Unbelievable!
What about AF-KL between France and The Netherlands... or BA & IB between UK and Spain in the future?!

[brussels airlines]

Just for the record, there are lots of projects that can be realized without the permission of the EC:

-codeshares with Lufthansa (and partners)
-integration of Privilege in Miles&More
-membership with Star Alliance

The other (financial) projects will have to wait until the EC gives their green light.

[brusselsairlinesfan]

Hope that the procedure won't take too much time...
Also fingers crossed wainting for the green light!

[taz001]

One of the E.U. commissioners that has to decide in this case is Neelie Kroes, the same lady that had an incident with Yves Leterme when he was Prime Minister during the 'Fortis-BNP Paribas case'... I can only hope this had no influence in the decissions she makes.

[NCB]

I'm a little bit surprised by this preliminary decision and I'm sure that management of both airlines is too.

I don't see how you can start putting monopoly rulings on single A to B non-domestic routes, this must be something some kind of bored junior politician is trying to implement.
One can put such rulings on entire markets but there are so many routes that are being flown on monopoly basis without limitations.

I think that this decision smells a bit like backstage manipulation (in more common words: corruption).

If this can't be approved, then surely there's no reason for them to approve AF-KLM's stake in AZ since there would be a monopoly on so many more routes.

Edit: Did some research on Neelie Kroes because I found the name to sound a bit ... Dutch.
http://nl.wikipedia.org/wiki/Neelie_Kroes

A Dutch politician who was a former transportation minister of Netherlands, ruling on LH-SN merger is maybe very inappropriate.

[BrightCedars]

On this basis I don't understand how the Commission allows any carrier to operate in code-share agreement with another carrier on a given route where the two combined would create a monopoly, nor understand how the Commission allows a single carrier to solely serve a point-to-point route as it would constitute a de facto monopoly. There wasn't that much trouble for the deals between SN and AF or later SR other than opening up some slots on the 'monopoly' routes.

I think there is something bias in this game and I don't like it. If I were SN and LH I would eventually think of suing the EC as they should not be judge and party, and as an important Brussels based customer, they are party in this case and their interest is lower tickets in and out of BRU. Someone else should be in charge of the enquiry as I don't think their impartiality can be guaranteed.

I hope the deal will eventually go thru because SN and BRU need a strong partner for one and home carrier for the other. And also, this would be a very bad prospect for any future deals, and I would hope it cast big clouds on existing deals. It is lunatic to believe that there can be direct competition on every single route between EU points, and all airlines would remain viable, sometimes it just doesn't make sense to compete, which is ok as long as one is free to decide to start competing at any moment (access to slots, same conditions at airports, etc.).

[NCB]

Brightcedars, you probably didn't get to read my post before posting but it looks like we're sharing the exact same point of view.

Ruling on single routes is inappropriate and reflects bias.

[LJ]

Unbelievable!
What about AF-KL between France and The Netherlands... or BA & IB between UK and Spain in the future?!

AF/KL is required by the EU Competition authorities to make room on AMS-CDG and any other city pair from France and Amsterdam if someone wants. This means giving up (high quality) slots at both ends. However, (and fortunate for AF/KL) no airline is interested in picking up these slots. Furthermore the EU mentioned that the Thalys rail link will make sure that there is sufficient competition between Amsterdam and Paris....

Furthermore AF/KL were ordered by the British Competition authorities to surrender slots for 7 weekday rotations on the AMS-LCY (both peak and off peak slots at each airport) route when they took over VLM... The EU was a litlle bit less drastic but reportedly still asked for 4 weekday rotations....

BTW some of the problems of the LH takeover may have to do with easyJet. They may be interested in a few early morning slots at BRU (but are not getting them at this moment). However as the EU is not satisfied with LHs offer, this isn´t probably part of LHs plan...

[NCB]

AF/KL is required by the EU Competition authorities to make room on AMS-CDG and any other city pair from France and Amsterdam if someone wants. This means giving up (high quality) slots at both ends. However, (and fortunate for AF/KL) no airline is interested in picking up these slots. Furthermore the EU mentioned that the Thalys rail link will make sure that there is sufficient competition between Amsterdam and Paris....

I'm sure LH and SN would have allowed to open some slots if that were the condition.

Also, the ICE competes on Frankfurt, Hamburg routes as can be seen here: http://en.wikipedia.org/wiki/Intercity-Express

So this is clearly going beyond that level.

[tolipanebas]

Interesting to note is that of all the routes quoted, only FRA is access restricted, so while the merger would indeed create a 'de facto' monopoly on the quoted routes to HAM, MUC and ZRH, there really is nothing stopping competitors to enter any of these markets from BRU should they want too!

Can LH-SN really be blamed for the fact that Air Berlin doesn't want to fly BRU-HAM, that EZY doesn't want to fly 4 times a day between BER-BRU or GVA-BRU or that litterally nobody but SN-LH wants to operate on MUC-BRU for instance?

Seems like the EU is considering blocking the growth of some airlines (SN-LH), because of a complete lack of business-guts from others...

BTW- it seems the EU forgot about the fact that EZY operates on BRU-GVA, since that route is mentioned as a monopoly route in case of a merger; if this is indicative of the quality of the work from them...

What can LH do, other than point the EU to the fact that none but FRA is access restricted, that the SN-LH combo is likely going to reduce the total number of flights on the routes anyway (including FRA) and that as such the market is widely open to anybody willing to step in, even on the access restricted route BRU-FRA?
Hey, it's not their fault nobody wants to do so, is it???

Will be interesting to see what the EU will decide in the AZ-AF-KL case too then...
Besides, I'd like to see their route recomendations on the original AF-KL deal then, because to my knowledge there are quite some monopoly routes between France and The Netherlands too: who's operating TLS-AMS, LYS-AMS or MRS-AMS to name just 3 routes, other than the KL-AF group?

[NCB]

BTW- it seems the EU forgot about the fact that EZY operates on BRU-GVA, since that route is mentioned as a monopoly route in case of a merger; if this is indicative of the quality of the work from them...

Not only that, isn't SN already code-sharing with LX on all BRU-Swiss routes?

I feel like someone's going to be sacked...

[HighInTheSky]

I feel like someone's going to be sacked...

I feel this all is going horribly wrong...

[chrisflyer]

All,

I do agree in principle. A few points of clarification, however:

* LH/SN is a minor deal and should, in the spirit of Europe-wide airline consolidation, be allowed to go through without much of a fuss.

* That being said, and having been involved in numerous anti-trust and competition cases at EU level, I do expect a positive outcome. Perhaps LH and SN slightly underestimated the Commission's level of scrutiny; they will in any case have to provide more evidence that they will not hamper competition on the routes in question.

* Concerns over BRU-FRA/MUC are understandable, as they are hub-to-hub routes. FRA is saturated and it is likely that, in the initial formal submission to the Commission, LH has been hesitant to give up valuable slots. Pretty much the same goes for MUC.

* BRU/HAM and BRU/BER will see EZY or AB service as soon as fares go up significantly, so I see little or no problem.

* Concern over BRU-GVA is frankly speaking ridiculous: there will be little or no change compared to the current situation. Swiss already sell seats on SN. EZY is sufficiently estabished on the route and they will likely increase their market share by adding one or two daily rotations in due course.

One rectification I'd like to make is that the competent authority in this case is DG TREN (Transport & Energy), and NOT DG COMP (Competition). It is eventually the Commission as a college (all 27 Commissioners) that approves or blocks a merger, upon advice of the competent Commissioner who in this case is VP Antonio Tajani and not Neelie Kroes. This being said, it is at least questionable whether Mr Tajani will apply the same amount of ruthless scrutiny when it comes to approving AF-KL-AZ...

Cheers,

Chris

[legfontosabb]

I'm also surprised that they still talk about "SN Brussels Airlines"... didn't they notice the merge with VEX and the change of name? Anyway that's a small detail...

Not only that, isn't SN already code-sharing with LX on all BRU-Swiss routes?

Yes indeed, SN flies BRU-GVA and Swiss flies ZRH-BRU but they both sell seats on the two routes.
I believe nobody else flies BRU-ZRH but Easy also flies BRU-GVA (and BRU-Berlin)

so, it's "No deal yet" Iguess?

[itami]

I think there is something bias in this game and I don't like it.

I share your thoughts BrightCedars ! In my opinion the official reasons as mentioned in the EU press release just hide something more fundamental : some EU members (especially France and U.K) want to stop the Germans getting too powerful on the European continent. After the Air France/KLM deal with Alitalia and now that the merger BA/IB looks very unlikely, the British surely want their piece of the European cake.The old geopolitical considerations still play their role, even in the so called ‘single European market’. So I would suggest SN to prepare in time for an alternative : BA and Oneworld.