Lufthansa’s concessions to EU over Air Berlin may fall short

Bloomberg

Deutsche Lufthansa AG has to do more to allay European Union concerns about its takeover of most of Air Berlin Plc after
offering concessions that won’t fully appease regulators, according to two people familiar with the process.
Lufthansa would need to improve upon its offer to cede landing rights of Air Berlin’s Niki arm in order to win approval for
the deal, according to the
people, who spoke on condition of anonymity.
While Lufthansa Chief Executive Officer Carsten Spohr has said the carrier would “practically buy Niki without slots,” the offer submitted to the European Commission shows the company will hold on to many of Niki’s slots in Germany, including at congested airports such as Munich and Berlin Tegel, the people said.
The concessions were sent to rivals and customers for feedback with a response deadline of December 11.
EU Competition Commissioner Margrethe Vestager has flagged “very serious overlaps” and “a risk of a very strong limitation of competition on quite a number of routes” that might lead to worse service and higher prices for flights in Germany. Regulators have until December 21 to clear the acquisition with concessions or open an extended investigation. Lufthansa is keen for a quick decision to keep costs in check or it may walk away from the deal.
At the commission’s request, Air Berlin went back to the two parties who lost out in the bidding for Niki in October if they’d stand up their bids, two people familiar with the negotiations said. British Airways parent IAG said it is no longer interested, while talks with Thomas Cook Group Plc’s Condor arm are ongoing, the people said.
Companies that want to avoid a lengthy investigation of a
complicated deal are often
encouraged to offer clearcut divestments to eliminate antitrust concerns. That might imply that Lufthansa would have to propose more to allay the EU, which it could potentially do.
Lufthansa shares fell 0.6 percent to 29.04 euros at the close
in Frankfurt.
The commission in Brussels, Lufthansa and Air Berlin had no comment. Vestager has said regulators are happy to facilitate companies that have the ambition to solve problems quickly in merger reviews.

Zurich Airport
Lufthansa would give up some slots Niki has in Germany and at Zurich airport, which would usually see them handed back to a slot pool and doled out by airport coordinators, with half going to existing airlines. Lufthansa could expect to win about half of those, if a similar process is followed, the people said.
One of the people said Condor may also try and become part of the remedies package by pledging to take and use some of the Niki slots Lufthansa is willing to give up, thererby ensuring they don’t end up back in Lufthansa’s hands through official distribution rules.
Condor and IAG declined
to comment.
Lufthansa hasn’t offered to divest any slots in use by regional operator LGW nor will it sell slots at holiday destination airports, such as in Spain or Italy.