31 Jan, 2017

Lufthansa/airberlin Secure a Green Light for the Wet-Lease Deal from the German Competition Authority

On January 30, 2017, the German competition authority (Ger. Bundeskartellamt) has decided to give final clearance to the implementation of the plan previously announced by two carriers, Lufthansa and airberlin, directed at the wet-lease of 38 aircrafts for the period of six years.  Under current state of affairs, there are no firm grounds for the subject agreement to be prohibited, since, as it was emphasized by Bundeskartellamt, it was not proven that it would in fact result in an actual distortion of competition.  In this context, apart from reaffirming the need for a presumption of competition violation to be proven in order for an agreement between competitors to be prohibited on said basis, this case further represents an important example of an excellent practice of market participants wishing to avoid the risk of ‘gun-jumping’ as well as its severe consequences.

In light of the above said, the two carriers followed the procedure provided for in the German merger control rules and notified the planned agreement to the German authorities in advance, before its actual implementation.

With regard to the factual background of the case, the following should be noted:

  • Pursuant to the wet-lease agreement airberlin will lease 38 passenger aircraft stationed at German and Austrian Airports to Lufthansa and its subsidiaries Eurowings and Austrian Airlines;
  • Said lease (as it is usually the case with this type of aircraft lease agreements) will leave the responsibility for flight operation, crew planning, maintenance as well as other major responsibilities with airberlin;
  • Lufthansa will not acquire any of the slots owned and operated by airberlin;

Although serious concerns were raised by competitors, the Bundeskartellamt nevertheless backed airberlin and Lufthansa.  “Lufthansa will not take over any of airberlin’s slots. Nor will the lease of the aircraft affect the re-allocation of slots that have so far been used by airberlin.  Naturally, with the additional aircraft Lufthansa will be able to expand its business.  However, this potential expansion is not sufficient to justify a prohibition of the agreement”, said the President of Bundeskartellamt, Mr. Andreas Mundt.

Further, although airberlin is undergoing a restructuring process, said fact did not significantly influence the reasoning of the competition authority – in its opinion, as long as the wet-lease agreement is not used as a method to reallocate slots that airberlin was obliged to return within the restructuring process, no significant connection between the subject agreement and such process could be made.

Contrary to the before mentioned, the interests and views of the customers and travel agents were indeed taken into account as an important factor in the decision making process – the fact that said subjects did not raise any serious concerns with respect to the agreement at hand only confirmed the logic of the Bundeskartellamt and contributed to its approval.

From all the above said it can be deduced that, according to the German competition authority’s view, a simple presumption of distortion of competition is not sufficient for an agreement between competitors to be prohibited.  Such prohibition would need to be firmly founded, it so appears.  What will be the stance of other national competition authorities in same and/or similar cases, it is yet to be seen.

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