EU to Investigate Lufthansa, Brussels Air Deal

European antitrust authorities on Monday launched an investigation into Lufthansa's proposed takeover of smaller Belgian rival Brussels Airlines because of competition concerns.

The European Commission said the deal would create a monopoly between Brussels and Frankfurt, Hamburg and Munich and substantially reduce competition from Brussels to Berlin.

It would also impede competition between Belgium and Switzerland. The acquisition, announced in September 2008, is worth up to EUR250 million euros (USD$328 million) and will allow Lufthansa to expand its network and add premium passengers.

The German carrier plans to buy a 45 percent stake in the Belgian airline for EUR65 million, with an option to buy the rest from 2011. The total price would depend on performance-related factors and initially on 2010 results.

"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," EU Competition Commissioner Neelie Kroes said in a statement. The Commission said it had until June 10 to make a final decision on the deal. Lufthansa said it would analyse the Commission's decision and that it expected the executive body to approve the takeover.

"We expect the process to continue rapidly and that the relevant approvals will be granted," said a Lufthansa spokesman. European airlines have stepped up the pace of alliances and mergers as they battle a global economic downturn even as fuel prices are retreating from record highs.Lufthansa last month signed a deal to acquire loss-making Austrian Airlines, making it the biggest airline in Europe. It is vying with Air France and British Airways to be European industry leader.

Brussels Airlines would bring a prime location where the European Union and NATO are based, logistics experience and a wide network, including many flights to and from Africa. Brussels Airlines carried 5.8 million passengers in 2007, compared with 63 million for Lufthansa.

Source: Airwise