EN Case No M.7541 - IAG / AER LINGUS Only the English text is available and authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 6(1)(b) in conjunction with Art 6(2) Date: 14/07/2015 In electronic form on the EUR-Lex website under document number 32015M7541 EUROPEAN COMMISSION Brussels, 14.07.2015 C(2015) 5026 final In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and PUBLIC VERSION other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description. MERGER PROCEDURE To the notifying party: Dear Madam(s) and/or Sir(s), Subject: Case M.7541 – IAG/AER LINGUS Commission decision pursuant to Article 6(1)(b) in conjunction with Article 6(2) 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 I. THE PARTIES ............................................................................................................ 4 I.1. IAG .................................................................................................................... 4 I.2. Aer Lingus ......................................................................................................... 4 II. CONCENTRATION ................................................................................................... 5 III. EU DIMENSION ........................................................................................................ 5 IV. MARKET DEFINITION ............................................................................................ 5 IV.1. Overview of Parties' activities ........................................................................... 5 IV.2. Air transport of passengers ................................................................................ 6 IV.2.1. Origin and destination approach (O&D) ............................................. 6 IV.2.2. Distinction between groups of passengers .......................................... 7 IV.2.3. Markets for direct flights and indirect flights ...................................... 9 IV.2.4. Airport substitutability ....................................................................... 11 IV.2.5. Provision of access to flights of another carrier for connecting passengers in the context of interlining arrangements ...................... 23 IV.3. Maintenance, repair, overhaul ('MRO') ........................................................... 26 IV.4. Groundhandling ............................................................................................... 27 IV.5. Landside cargo handling .................................................................................. 28 V. COMPETITIVE ASSESSMENT AIR TRANSPORT OF PASSENGERS ............. 28 V.1. Methodology for calculating market shares .................................................... 29 V.2. Conceptual framework .................................................................................... 30 V.2.1. Treatment of joint ventures for the assessment of the Transaction ... 30 V.2.2. Competitive situation likely to prevail absent the Transaction ......... 31 V.3. Filters 31 V.4. Closeness of competition ................................................................................. 32 V.4.1. General approach to closeness of competition issues ........................ 32 V.4.2. Parties' and competitors' market positions ......................................... 33 V.4.3. Business models and brands .............................................................. 33 V.4.4. Existence of significant bases at route ends ...................................... 36 V.5. Airport congestion ........................................................................................... 36 V.5.1. London Heathrow .............................................................................. 37 V.5.2. London Gatwick ................................................................................ 39 V.5.3. London City ....................................................................................... 39 V.5.4. London Luton .................................................................................... 40 V.5.5. London Stansted ................................................................................ 40 V.5.6. London Southend ............................................................................... 41 V.5.7. Dublin ................................................................................................ 41 V.6. Direct/direct overlap routes ............................................................................. 43 V.6.1. London–Dublin .................................................................................. 43 V.6.2. Belfast–London ................................................................................. 52 2 V.6.3. Dublin–Madrid .................................................................................. 60 V.6.4. Dublin–Barcelona .............................................................................. 64 V.6.5. Dublin–New York ............................................................................. 69 V.6.6. Dublin–Chicago ................................................................................. 75 V.7. Direct/indirect overlap routes .......................................................................... 80 V.8. Indirect/indirect overlap routes ........................................................................ 87 V.9. IAG's position at London Heathrow post Transaction .................................... 89 V.10. Feed traffic issues ............................................................................................ 90 V.10.1. Introduction ....................................................................................... 90 V.10.2. Commission's assessment .................................................................. 91 VI. COMPETITIVE ASSESSMENT GROUNDHANDLING ..................................... 113 VI.1.1. Horizontal relationships ................................................................... 113 VI.1.2. Vertical relationships ....................................................................... 115 VI.1.3. Conclusion ....................................................................................... 118 VII. COMPETITIVE ASSESSMENT LANDSIDE CARGO HANDLING .................. 118 VIII. COMPETITIVE ASSESSMENT MRO .................................................................. 119 VIII.1.1. Horizontal relationships ................................................................... 119 VIII.1.2. Vertical relationships ....................................................................... 121 IX. COMMITMENTS ................................................................................................... 125 IX.1. PROPOSED COMMITMENTS .................................................................... 125 IX.1.1. The slot commitments ..................................................................... 126 IX.1.2. The SPA commitments .................................................................... 127 IX.1.3. Other provisions .............................................................................. 130 IX.2. ASSESSMENT OF THE FINAL COMMITMENTS ................................... 131 IX.2.1. The slot commitments ..................................................................... 132 IX.2.2. The SPA commitments .................................................................... 136 IX.3. Overall conclusion on the Final Commitments ............................................. 142 X. CONCLUSION ....................................................................................................... 142 3 (1) On 27 May 2015, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 by which International Consolidated Airlines Group, S.A. ("IAG") acquires indirectly within the meaning of Article 3(1)(b) of the Merger Regulation control of the whole of Aer Lingus Group, plc. ("Aer Lingus") by way of a public offer (the "Transaction"). (2) IAG and Aer Lingus are hereinafter referred to as the "Parties". 1. THE PARTIES 1.1. IAG (3) IAG is the holding company of each of British Airways Plc3 ("BA"), Iberia Líneas Aéreas de España, S.A.4 ("Iberia"), and Vueling Airlines, S.A.5 ("Vueling").6 The IAG airlines (BA, Iberia and Vueling) fly to around 200 destinations with approximately a further 200 destinations served under various codesharing relationships. (4) BA has its main hub at London Heathrow (LHR) and also operates bases at London Gatwick (LGW) and London City (LCY). Iberia's main hub is at Madrid Barajas (MAD). Iberia also has franchise arrangements