A deal by Air-France-KLM and Delta Air Lines to take joint control of Virgin Atlantic was approved yesterday by Brussels.
The decision by the European Commission under EU merger regulations found that the transaction “would raise no competition concerns in the European Economic Area”.
The ruling concerns the proposed acquisition by Air France-KLM of a 31% joint-controlling interest in Virgin Atlantic. This leads to joint control over the UK carrier by Air France-KLM, Delta and Virgin Group.
The Commission’s investigation found that none of the airlines’ overlapping routes raised competition concerns.
This is despite a “small number of routes” having high combined market shares.
However, the Commission found that Virgin Atlantic, Delta and Air France-KLM “are not close competitors and they continue to face significant competition from other carriers on the routes where the activities of both airlines overlap”.
Control over a large portfolio of slots at congested airports could result in higher barriers to entry for airlines, which in turn could result in higher fares for passengers.
Yet the Commission found that an increase in the carriers’ combined slot portfolio “is unlikely to have a negative effect on passengers at London Heathrow and Manchester airports”.
Antitrust regulators also investigated the impact on cargo and maintenance.
It concluded that the proposed transaction “would raise no competition concerns in any of the relevant markets” and cleared the case unconditionally.
The Commission previously approved the acquisition of joint control of Virgin Atlantic by Delta and Virgin Group in in June 2013.
Yesterday’s decision approves the acquisition of joint control by Air France-KLM, Delta and Virgin Group over Virgin Atlantic through the purchase of shares.
“At the same time, Air France-KLM, Delta and Virgin Group intend to enhance the scope of their existing co-operation in the provision of air transport services for passengers and cargo by combining and expanding two pre-existing ‘metal neutral’ joint venture arrangements between Delta and Air France-KLM, and between Delta and Virgin Atlantic, the Commission added.
“These are co-operative arrangements in which they jointly plan and manage capacity, pricing, and inter-airline financial settlements, with all participating airlines sharing profits equally.”
A Virgin Atlantic spokesperson said: “We are pleased to have received EU merger approval for Air France-KLM to take an equity stake in Virgin Atlantic.
“This clearance will deliver significant benefits to customers later this spring, as it enables a new codeshare agreement between Virgin Atlantic, Air France, and KLM to be created, and expands the existing codeshare relationship between Delta, Virgin Atlantic, Air France and KLM.”
Separately, Virgin Atlantic is leading a consortium hoping to take over UK regional carrier Flybe.