IRELAND: European Commission approves with concerns IAG’s proposed acquisition of Aer Lingus

The European Commission (Brussels) has issued this statement concerning the proposed acquisition of Aer Lingus (Dublin) by the International Airlines Group (IAG) (London):

European Commission logo

The European Commission has cleared under the EU Merger Regulation the proposed acquisition of Irish airline Aer Lingus by International Consolidated Airlines Group (IAG).

IAG is the holding company of British Airways, Iberia and Vueling. The clearance is conditional upon commitments offered by the parties to address the Commission’s concerns regarding the transaction as notified.

The Commission had concerns that the merged entity would have faced insufficient competition on several routes.

The Commission also found that the merged entity would have prevented Aer Lingus from continuing to provide traffic to the long-haul flights of competing airlines on several routes.

European Commissioner in charge of competition policy Margrethe Vestager said: “By obtaining significant concessions from the airlines the Commission has ensured that air passengers will continue to have a choice of airlines at competitive prices after IAG’s takeover of Aer Lingus.

The five million passengers travelling each year from Dublin and Belfast to London will be able to choose among several strong carriers.

And we are also protecting passengers travelling on connecting flights between Ireland and the rest of the world.”

The clearance decision is conditional upon the following commitments, which address the Commission’s concerns:

The release of five daily slot pairs at London-Gatwick airport to facilitate the entry of competing airlines on routes from London to both Dublin and Belfast ; and Aer Lingus continuing to carry connecting passengers to use the long-haul flights of competing airlines out of London- Heathrow, London-Gatwick, Manchester, Amsterdam, Shannon and Dublin .

The Commission’s investigation

The Commission’s investigation found that the transaction, as initially notified, would have led to high market shares on the Dublin-London, Belfast-London and Dublin-Chicago routes. The merged entity would have faced insufficient competitive constraints from the remaining players which could ultimately lead to higher prices.

The Commission also analysed whether there was a risk that IAG would prevent passengers flying on Aer Lingus’ short-haul flights, from Dublin, Cork, Shannon, Knock and Belfast, from

connecting with long-haul flights operated by competing airlines out of other European airports, including Heathrow, Gatwick, Manchester, Dublin and Amsterdam.

IAG submitted commitments to release five daily slot pairs at London Gatwick which can be used on the specific routes of concern, namely Dublin-London and Belfast-London.

The availability of these slots, and other incentives such as the acquisition of grandfathering rights after a certain period of time, facilitate the entry of competing airlines.

Furthermore, IAG made a commitment to enter into agreements with competing airlines which operate long-haul flights out of London Heathrow, London Gatwick, Manchester, Amsterdam, Shannon and Dublin so that Aer Lingus will continue to provide these airlines with connecting passengers.

Passengers will therefore continue to have a choice to use other airlines than IAG when connecting at these airports, for instance on Heathrow-New York, Gatwick-Las Vegas, Manchester-Orlando, Amsterdam-Singapore, Shannon-Chicago, and Dublin-Chicago.

These commitments adequately address all competition concerns identified by the Commission.

The Commission therefore concluded that the proposed transaction would not significantly impede effective competition in the European Economic Area (EEA) or a substantial part of it. The transaction was notified to the Commission on 27 May, 2015.

Companies and products International Consolidated Airlines Group (“IAG” ) of the United Kingdom, is the holding company of British Airways, Iberia Líneas Aéreas de España S.A. and Vueling Airlines S.A.

Aer Lingus of Ireland is currently mainly owned by the Republic of Ireland and Ryanair, a competing carrier. Other significant shareholders include Etihad Airways.

Both IAG and Aer Lingus provide air transport for passengers, air transport for cargo, airport ground handling services and landside cargo handling services.

Merger control rules and procedures

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of mergers do not pose competition problems and are cleared after a routine review.

From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

The commitments offered by the Parties will be made available as of 16 July under the case number

The International Airlines Group (IAG) issued this statement:

IAG logo

International Consolidated Airlines Group (IAG) welcomes the decision by the European Commission to approve its Offer for Aer Lingus.

IAG has offered the following remedies to the EC as part of the regulatory process:

Five daily slot pairs will be made available to other airlines at London Gatwick for flights between the airport and Dublin or Belfast.
Specifically, two of the five daily frequencies must be operated between Gatwick and Dublin.
One daily frequency must be operated between Gatwick and Belfast.
The other two frequencies can be operated between Gatwick and either Dublin or Belfast.
Other airlines can apply for seats on Aer Lingus’ shorthaul network for their transfer passengers, on normal commercial terms.