Home News & Events COMPETITION LAW NEWS: EU Commission Against Proposed Merger between Aegean Airlines and Olympic Air

COMPETITION LAW NEWS: EU Commission Against Proposed Merger between Aegean Airlines and Olympic Air

Sunday, 06 February 2011 00:30

On January 26, 2011, the European Commission announced that it has prohibited the proposed merger between Aegean Airlines and Olympic Air based on EU Merger Regulations, as otherwise it would have given rise to a quasi-monopoly within the Greek air transport market on nine established routes, with the consequence of higher fares for four million Greek and European consumers travelling on routes to and from Athens very year. The proposed merger was submitted for clearance on 24 June 2010.

The Commission’s investigation which commenced on 30 July, 2010 established that the two carriers jointly control more than ninety per centum (90%) of the Greek domestic air transport market which any other airline undertaking would find it rather difficult to penetrate the established air routes whilst at the same time, to match the proposed merged undertakings’ air fare.

In defence of the relative prohibition, Commissioner Joaquín Almunia responsible for Competition Policy is said to have commented that: "The merger between Aegean and Olympic would have led to a quasi-monopoly in Greece and thus to higher prices and lower quality of service for Greeks and tourists travelling between Athens and the islands. It is the duty of the Commission to prevent the creation of monopolies when applying the EU merger control powers conferred on it by the Member States."

As with previous airline mergers, the Commission analysed the combined effects of the proposed merger on the individual routes on which both companies operate. It received views and complaints from a large number of market participants in Greece and internationally, including consumer associations, public authorities, travel agents, airport operators, ferry operators and other airlines.

The investigation showed that ferry services do not generally constitute a sufficiently close substitute to air services so as to discipline the merged entity's pricing behaviour post-merger. Their travel times are much longer and frequencies lower. The only domestic route where ferry services were considered a close substitute to air services is Athens-Mykonos for which the Commission concluded there were no competition problems.

The market investigation also showed that there is no prospect that any new player would enter the Greek market after the merger and challenge the new entity on a sufficient scale as concerns domestic flights to and from Athens.

The companies offered to release slots at Athens and other Greek airports as well as other remedies such as access to their frequent flyer programmes and interlining agreements However, the nature and the scope of these remedies were insufficient to ensure that customers would not be harmed by the transaction. This is notably because the main problem in this case - unlike in many previous airline cases - was not the availability of slots, which are available at Athens airport and at most Greek airports. The market test also showed that the remedies were unlikely to entice a credible new player to create a base at the Athens airport and exert a credible competitive constraint on the affected routes.

The Commission, therefore, had no alternative but to conclude that the concentration "would significantly impede effective competition in the internal market or a substantial part of it" (Art 2.3 of the Merger Regulation).

It is to be pointed out that since 2004, the Commission has investigated eleven (11) proposed mergers in the airline market and the Aegean Airlines and Olympic Air proposed merger is the second to be subjected to a prohibition, the first one being the proposed acquisition of Aer Lingus by Ryanair in 2007, both Irish carriers which prohibition was subsequently upheld in a judgement of 6 July, 2010 by the General Court.

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