Lufthansa's swoop on Air Berlin stirs competition concerns

Transportation Reuters

Planes stand on the tarmac during a pilots strike of German airline Lufthansa at Munich airport, Germany, November 23, 2016. REUTERS/Michael Dalder (Copyright Reuters 2016)

With the ink barely dry on Lufthansa's <LHAG.DE> deal to take over large parts of insolvent Air Berlin, the airline risks having its wings clipped by regulators and rivals concerned about unfair competition.

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Lufthansa signed a 210 million euro ($248 million) deal on Thursday to take over Air Berlin units Niki and LG Walter, plus some short-haul planes, to cement its position in Germany and expand its Eurowings budget brand.

Austrian competition authorities said on Friday they believed Lufthansa, which also owns Austrian Airlines, would be too dominant in Vienna if it owned Austria-based Niki.

"We see an anti-competitive Lufthansa monopoly in Vienna on many routes after the takeover of Fly Niki," the competition authority's spokeswoman said. "We will voice our concern about the takeover at the European Commission."

The German cartel office said it expected the European Commission to take a close look at the deal.

The European Commission had no comment, with a spokesman saying it had not yet been formally notified of the deal.

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RIVALS COMPLAIN

The deal has also raised eyebrows with rival airlines. Ryanair <RYA.I> CEO Michael O'Leary has called it a "stitch-up", saying it would give Lufthansa a 95 percent share of the German domestic market. Ryanair said on Thursday it would take up its case with the EU.

Lufthansa has hit back at such claims, saying the deal would have to be examined not only from the point of view of the German market but Europe as a whole.

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Lufthansa has said it has a market share of 34 percent on routes to and from Germany, while Air Berlin had 14 percent. With the takeover of parts of Air Berlin that will remain below 48 percent, which Lufthansa says is equivalent to Ryanair's market share in Ireland.

Willie Walsh, CEO of British Airways parent IAG <ICAG.L>, said on Friday he saw "significant" competition concerns with the deal, which will see Lufthansa taking on around 80 of Air Berlin's 130 planes.

Lufthansa CEO Carsten Spohr said on Thursday he expected the deal would be approved by the end of the year.

A company source said Lufthansa was confident of getting approval, but expected there would be some remedies, as was the case when Lufthansa acquired Austrian Airlines and Swiss International Air Lines.

Air Berlin remains in talks with Britain's easyJet <EZJ.L> over other assets.

(Reporting by Victoria Bryan, Alistair Smout, Kirsti Knolle, Matthias Inverardi, Ilona Wissenbach; Editing by Douglas Busvine and Elaine Hardcastle)

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