German carrier Lufthansa and Swiss International Air Lines are set to merge after the European Commission on Tuesday approved Lufthansa's acquisition of Swiss, in a further consolidation of European airlines.
The airlines will have to scale back in several European airports
But the commission said that the purchase was dependent on the parties surrendering take-off and landing slots, in particular at Zurich and Frankfurt airports, and other concessions.
"In light of these commitments, the commission has concluded that the transaction would not significantly impede effective competition," said the commission, the executive which regulates competition in the 25 member states.
Lufthansa has said it wants to acquire Swiss to expand its international network and boost its competitive position in Europe. The purchase, which cost Lufthansa up to 310 million euros ($370 million), is the second-biggest merger in the European aviation sector following that of Air France and KLM a year ago.
Germany's flag carrier signed a deal on March 22 to take over its ailing Swiss counterpart, which was created after Swissair collapsed in 2001. Swiss has since faced huge financial problems, battered largely by the unrelenting rise in low-cost airlines around Europe.
The German airline had already received a green light from the Swiss government and corporate shareholders, who together hold 85 percent of Swiss and have agreed on a symbolic sum for their stock. The approval from the competition authorities, which came a day after a similar clearance from the United States, was the final step in the takeover.
EU says competition assured
"I welcome airline consolidation in Europe, but it should not lead to higher prices or reduced choice of carrier," said EU competition commissioner Neelie Kroes (photo). "The commitments given by Lufthansa ensure that competitors will be able to offer new services in competition with the merged company."
"This is a partnership for all our customers," said Wolfgang Mayrhuber, chairman and CEO of Lufthansa, in a statement. "In just a few weeks time, the customers of our two airlines will be feeling the first benefits that our partnership will bring."
For his part, Christoph Franz, CEO and president of Swiss said "the green light from Brussels and Washington gives us the opportunity to ensure the long-term future of the air transport connections that are so crucial to Switzerland and its economy."
Lufthansa quickly changed the home page of its aviation group Internet site displaying pictures of Lufthansa and Swiss employees, the tailfins of the two companies and the words "Grüezi mitenand ('Hello to all of you' in Swiss German dialect) and welcome aboard."
Field open for competitors
Lufthansa at Frankfurt Airport
Apart from Zurich and Frankfurt, the EU commission said the parties had agreed to surrender slots at Munich, Düsseldorf, Berlin, Vienna, Stockholm and Copenhagen, making 41 round trips per day potentially available to competitors. Lufthansa is also barred from offering more flights on the affected routes so that any new entrant would have a fair chance to establish itself as a credible competitor.
Lufthansa said the decision to give up the slots at several European airports would not significantly change its competitive position or hit its earnings. "It will not greatly impact on our competitive position," a spokeswoman said and added that the company is still maintaining its full-year profit targets.
Lufthansa said previously that it expects operating profit for 2005 to be on a par with the 383 million euros it recorded last year.
Lufthansa Group last year had revenue of nearly 17 billion euros, with its more than 90,000 staff members transporting 50.9 million passengers and 1.75 million tons of cargo. The German and Swiss carriers together operate 1,300-1,400 daily flights.