The Italian Competition Authority clears a merger between two airliners with high market shares

By a decision made on 22 September 2011 the Italian Competition Authority (ICA) has unconditionally cleared an airline merger, the Meridiana acquisition of Air Italy, in spite of the very high market shares the parties had on some overlapping routes (Case C11167, Meridiana-Azionisti Air Italy/Air Italy Holding-Meridiana Fly).

On the basis of the traditional city pair method the ICA found that the merged carrier would have a 70-80% market share on the Olbia-Napoli route and quasi monopoly position with a 90-95% market share on the Olbia-Torino and Verona-Napoli routes. Nevertheless, the ICA believed that the transaction would have not created any competition problems because the dominant position of the merger carrier was contestable. New operators were able to start links competing with Meridiana and Air Italy as there were no entry barriers enter. In fact none of the airports connected by the examined routes were congested and subjected to the coordination regime. Therefore any air carriers could connect these airports by using its slots or by applying for new ones.

While assessing the competition impact of airliner mergers, it should be looked not only at the market shares of the merging carriers but also at the in the shape of availability of airport slots. The ICA decision, however, is consistent with the European Commission practice, according to which mergers leading to very high market shares do not give rise to competition concerns provided that there exist credible competitors ( see for example, British Airways/Iberia). Relying on the available airport slots new operators can easily start a link in competition with the merging carriers, thereby setting off the reduction in competition resulting from the implementation of the merger.

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