EUROPEAN COMMISSION DG Competition Case M.8869 - RYANAIR / LAUDAMOTION Only the English text is available and authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 6(1)(b) NON-OPPOSITION Date: 12/07/2018 In electronic form on the EUR-Lex website under document number 32018M8869 EUROPEAN COMMISSION Brussels, 12.7.2018 In the published version of this decision, some C(2018) 4731 final information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are PUBLIC VERSION shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description. To the notifying party : Dear Sir or Madam, Subject: Case M.8869 – Ryanair/LaudaMotion Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/20041 and Article 57 of the Agreement on the European Economic Area2 1 OJ L 24, 29.1.2004, p. 1 (the "Merger Regulation"). With effect from 1 December 2009, the Treaty on the Functioning of the European Union ("TFEU") has introduced certain changes, such as the replacement of "Community" by "Union" and "common market" by "internal market". The terminology of the TFEU will be used throughout this decision. 2 OJ L 1, 3.1.1994, p. 3 (the "EEA Agreement"). Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË Tel: +32 229-91111. Fax: +32 229-64301. E-mail: [email protected]. Table of Contents 1. INTRODUCTION ....................................................................................................... 4 2. THE PARTIES ............................................................................................................ 4 3. THE CONCENTRATION .......................................................................................... 4 4. EU DIMENSION ........................................................................................................ 6 5. DESCRIPTION OF LAUDAMOTION'S BUSINESS PLAN AND ACTIVITIES ............................................................................................................... 7 5.1. LaudaMotion's business plan and activities prior to the announcement of the Transaction .............................................................................................. 8 5.2. LaudaMotion's business plan and activities after the announcement of the Transaction ................................................................................................ 14 5.3. Conclusion on the impact of the Transaction on LaudaMotion's business plan and activities ............................................................................. 19 6. ANALYTICAL FRAMEWORK .............................................................................. 20 6.1. Identification of the relevant markets .............................................................. 20 6.1.1. Air transport services to passengers .................................................. 20 6.1.2. Air transport services to tour operators ............................................. 33 6.1.3. Air transport services to other airlines ............................................... 36 6.2. Definition of the relevant markets under the O&D and airport-by- airport approaches ........................................................................................... 37 6.2.1. O&D approach ................................................................................... 37 6.2.2. Airport-by-airport approach .............................................................. 56 6.3. Relevant situation absent the Transaction ....................................................... 65 7. COMPETITIVE ASSESSMENT .............................................................................. 69 7.1. Assessment under the O&D approach ............................................................. 69 7.1.1. Introduction ....................................................................................... 69 7.1.2. Methodology used to calculate market shares ................................... 71 7.1.3. LaudaMotion's market shares overstate its competitive position .............................................................................................. 74 7.1.4. Market investigation .......................................................................... 76 7.1.5. Duesseldorf/Cologne/Weeze Niederrhein-Alicante .......................... 76 7.1.6. Duesseldorf/Weeze Niederrhein-Ibiza .............................................. 79 7.1.7. Duesseldorf/Cologne/Weeze Niederrhein/Dortmund-Malaga .......... 80 7.1.8. Duesseldorf/Cologne/Weeze Niederrhein-Faro ................................ 87 7.1.9. Duesseldorf/Weeze Niederrhein-Lanzarote ...................................... 90 2 7.1.10. Duesseldorf/Cologne/Weeze Niederrhein/Dortmund-Palma de Mallorca ........................................................................................ 91 7.1.11. Duesseldorf Cologne/Weeze Niederrhein-Tenerife Sur .................... 92 7.1.12. Duesseldorf/Cologne/Weeze Niederrhein-Gran Canaria .................. 94 7.1.13. Duesseldorf/Weeze Niederrhein-Fuerteventura ................................ 95 7.1.14. Stuttgart/Karlsruhe Baden Baden-Palma de Mallorca....................... 96 7.1.15. Vienna/Bratislava-Paphos/Larnaca ................................................... 97 7.1.16. Vienna/Bratislava-Marrakech ............................................................ 98 7.1.17. Vienna/Bratislava-Malaga ................................................................. 99 7.1.18. Vienna/Bratislava-Palma de Mallorca ............................................. 101 7.1.19. Frankfurt/Frankfurt Hahn-Palma de Mallorca ................................. 103 7.1.20. Berlin Tegel/Berlin Schoenefeld-Palma de Mallorca ...................... 106 7.1.21. Conclusion ....................................................................................... 107 7.2. Assessment under the airport-by-airport approach ........................................ 108 7.2.1. Introduction ..................................................................................... 108 7.2.2. Ability of Ryanair to foreclose access to the markets for the provision of passenger air transport services ................................... 108 7.2.3. Incentive of Ryanair to foreclose access to the markets for the provision of passenger air transport services ................................... 116 7.2.4. Overall effect on competition for passenger air transport ............... 117 7.2.5. Conclusion ....................................................................................... 118 8. CONCLUSION ....................................................................................................... 118 3 1. INTRODUCTION (1) On 7 June 2018, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which Ryanair Holdings plc ("Ryanair", Ireland) would acquire within the meaning of Article 3(1)(b) of the Merger Regulation control of the whole of LaudaMotion GmbH ("LaudaMotion", Austria), by way of purchase of shares (the "Transaction").3 Ryanair and LaudaMotion are collectively referred to as the "Parties". 2. THE PARTIES (2) Ryanair is a low-cost point-to-point airline operating throughout Europe. It operates a domestic and international network using a fleet of over 400 Boeing 737-800 aircraft. (3) LaudaMotion is an Austrian Air Operator Certificate holder owned by the private foundation of Niki Lauda, which has recently started a range of scheduled passenger air transport services primarily from Germany, Austria and Switzerland to Mediterranean and Canary Island leisure destinations. In February 2018, LaudaMotion acquired as a partial take-over certain assets of the former airline NIKI Luftfahrt GmbH ("NIKI"), the leisure subsidiary of insolvent airline Air Berlin, after NIKI had filed for insolvency in Austria and ceased activity as an air carrier on 13 December 2017.4 3. THE CONCENTRATION (4) On 16 March 2018, the Parties reached agreement on binding Heads of Terms, pursuant to which Ryanair would acquire a 75% shareholding in LaudaMotion in two inter-related stages ("Step One" and "Step Two"). The Transaction was announced on 20 March 2018.5 On 20 April 2018, the Parties executed the corresponding Share Purchase Agreement (the "SPA"). (5) Step One consists in the following: (a) The acquisition by Ryanair of a 24.9% shareholding in LaudaMotion; (b) The provision by Ryanair to LaudaMotion of six aircraft under a wet-lease agreement to LaudaMotion for the Summer 2018 IATA6 Season; 3 Publication in the Official Journal of the European Union No C 208 of 15.06.2018, p. 6. 4 The acquisition of certain NIKI assets by LaudaMotion was approved by the Spanish Comisión Nacional de los Mercados y la Competencia and the Austrian Bundeswettbewerbsbehörde. 5 See https://corporate ryanair.com/news/partnership-with-niki-lauda-to-develop-laudamotion-airline-in- austria/ 6 The International Air Transport Association (IATA) is the trade association for the world's airlines, representing some 280 airlines or around 83% of total air traffic. 4 (c) The addition by Ryanair of scheduled aircraft capacity of LaudaMotion to its website and the offering of these LaudaMotion seats for sale; (d) The provision by Ryanair of the working capital for LaudaMotion's daily operations