Introduction

Mergers and acquisitions are vital in the airline business – many airlines seek consolidation to navigate industry challenges and ensure competitiveness. However, the high number of M&A transactions has increased the industry’s market concentration, especially in North America and Europe. Competition authorities play an important role in protecting free competition, ensuring that transactions are carried out in line with the interests of consumers and the market. Their careful review processes help prevent undesirable market distortions.

As competition authorities play a vital role in maintaining a level playing field, Lufthansa Consulting believes securing merger clearance is more crucial than ever to unlocking the full potential of M&A transactions. Recent deals, such as the blocked jetblue Airways / Spirit Airlines merger, underline what is at stake (U.S. Department of Justice, 2024). This article highlights the most important aspects and common pitfalls of merger investigations, focusing on the processes in the European Union (EU).

Understanding merger control

Definition and the role of thresholds
Merger control processes are regulatory proceedings that ensure the compliance of transactions with the competitive situation in the affected markets. This is also relevant in the aviation sector, where market structures tend to be more concentrated and entry conditions may be complex. Certain transactions may reduce competition or limit consumer choice without appropriate remedies.

Filing for a merger, clearance in a particular jurisdiction often becomes necessary if the transaction parties (i.e. the notifying parties of the merger, normally the buy and sell side) match specific revenue or market share thresholds. The EU typically mandates filings for mergers where the combined global revenue exceeds €5 billion and EU-wide revenue for at least two parties surpasses €250 million. The number of jurisdictions where filing may become necessary depends on the scale of the transaction, the defined turnover thresholds, and the specific market impact of the merger, especially regarding the merging parties’ geographical presence. Therefore, the number of required filings can quickly reach double digits, particularly for the airline industry with its multinational operations. This often results in multi-jurisdictional filings (Multi-J), where the merger must be approved by several competition authorities simultaneously. It is important to note that in most jurisdictions, implementing any part of a planned transaction before receiving regulatory approval is strictly prohibited. Such conduct (commonly referred to as gun-jumping) may constitute a violation of competition laws and can lead to substantial fines and even criminal charges.

The standardized review process
Many jurisdictions use a two-phase review process. The European Commission (EC) Merger Regulation foresees a review process split into Phases I and II and serves as a baseline for this article. With this process, the EC aims at promoting competition in the EU and ensuring that mergers and acquisitions do not cause undue market concentration.

Before formally notifying the EC of a transaction, the parties engage in a pre-filing process. This pre-notification includes consultation and discussion with the EC, aiming to reveal potential competitive concerns raised through the transaction. This proactive involvement of the EC is supporting their work and can reduce the risk of delays by ensuring that the formal merger notification is streamlined and consistent. Furthermore, it enables the parties to address potential competitive concerns early in the process.

Phase I
In Phase I, the EC has 25 workdays to assess the transaction and its potential effects on competition, as stipulated in the EU Merger control procedures (European Union, 2013). The objective of the EC is to conduct an initial, swift review to ensure that the planned merger does not adversely affect competition. This timeframe can be extended by 10 workdays in case the parties choose to submit remedies (“early remedies”). The EC examines the impact of the transaction on competition, market shares, and consumer choice. Furthermore, the EC sends multiple requests for information (RFIs) to the parties and affected market participants. At the end of Phase I, the transaction is approved if no significant concerns are identified (conditional or unconditional approval) or moved to Phase II if competitive concerns require a more in-depth analysis.

An unconditional approval is granted if significant concerns are unlikely, while a conditional approval is subject to remedies to alleviate identified concerns. The merging companies can proceed with the acquisition if the remedies are compliant; an independent monitoring trustee verifies the compliance. In the case of a referral to a Phase II procedure, the EC foresees significant competition concerns and requires a deeper investigation.

Phase II
Phase II lasts 90 workdays, during which the EC seeks wider consultation with various stakeholders such as customers, suppliers, and competitors. Furthermore, the EC sends additional RFIs to the merging parties.

The EC invites the parties to multiple State of Play meetings to determine the investigation’s status. Typically, between days 30 and 50 of Phase II, the EC issues a so-called Statement of Objections (SO) if it finds that the merger may impact competition. This document details the preliminary competition concerns of the EC, and the parties are allowed to react to the SO by submitting a formal response in writing and participating in an oral hearing.

The 90-workday period of Phase II may be extended by 15 workdays if the remedies are handed in after workday 55 or extended by up to 20 workdays on the parties’ request or with their agreement. A significant implication of Phase II is that the EC may also suspend the timeline with a so-called “stop the clock” of the investigation under certain circumstances (i.e. if the parties fail to provide information).

After the review period, the EC may either clear the transaction unconditionally, approve it subject to remedies, or prohibit its implementation. It is important to note that in “any case all decisions and procedural actions taken by the EC are subject to review by the General Court and, ultimately, the European Court of Justice. Companies or other interested parties have the right to appeal the decisions within two months. This process ensures independent judicial oversight and safeguards the companies’ rights of defense in full compliance with legal standards” (European Commission, 2021).

The role of remedies in mitigating competitive concerns
In both review phases, remedies are essential in alleviating competition concerns identified by the EC or any other competition authority. Due to market concentration, remedies have become increasingly crucial for the European and US aviation sectors. This gives companies the opportunity to propose remedies to minimize competition concerns and enable the proposed transaction to go ahead. This also allows mergers to be carried out in highly concentrated markets without jeopardizing competition and ensures that market participants can continue to operate in fair and dynamic markets. Remedies can be clustered into three remedy structures: 1) Classic Remedy (divestment occurs post-clearance of the main transaction), 2) Upfront Buyer Remedy (requires a buyer agreement before the main transaction’s completion, and 3) Fix-It-First Remedy (a buyer agreement is secured and considered during the EC’s review, allowing immediate clearance post-approval). Regarding the EC, a clear trend towards Upfront Buyer Remedies can be observed (Competition Policy International, 2016).

The practical design of the remedy package may vary significantly depending on the case and the magnitude of identified competition concerns.

Exemplary airline cases with different scopes of remedies include:

• Korean Air / Asiana Airlines: Low-cost carrier T’way Air as a new entrant on routes between Europe and Seoul-Incheon. Additionally, the parties divested the global cargo business of Asiana Airlines to Air Incheon (European Commission, 2024).
• IAG / Aer Lingus: Divestment of slots at London-Gatwick and a Special Prorate Agreement (SPA) to feed long-haul operations of competitors (European Commission, 2014).
• Lufthansa / ITA Airways: easyJet as new direct entrant on numerous short-haul routes and divestment of slots in Milan-Linate. Strengthening of competitive indirect long-haul connections for IAG and Air France–KLM on Rome–San Francisco, –Washington, –Toronto (European Commission, 2024).

Post-review process phase
Following the conclusion of the Phase II market test, the merging parties implement the agreed remedies, and the specific deadline is outlined in the EC’s Phase II decision. It can vary from case to case depending on the nature and scope of the remedies (e.g. an imposed divestment of a business unit may require more time than a network-focused remedy). Furthermore, this timeline may be subject to negotiation between the parties and the EC.

During the remedy implementation, an independent monitoring trustee is appointed. The merging parties propose candidates, and the EC reviews the candidates before the formal appointment. The monitoring trustee reports directly to the EC to monitor the remedy implementation and ensure the remedies are met.

Negotiations with potential remedy takers are important, as the merging parties need to find competitors interested in acquiring / serving the defined remedies (e.g. divested assets or any other remedies). This involves undertaking extensive negotiations to define the conditions for the transfer or implementation, including drafting agreements and ensuring that the remedy-taker can retain effective competition in the market.

The EC then assesses the remedy-taker in the so-called suitable buyer test. This procedure ensures that the remedy-taker can maintain effective market competition. This includes assessing the remedy-taker’s financial solvency, independence, and ability to operate the remedies.

Lufthansa Consulting’s approach and best practices

Lufthansa Consulting has extensive experience throughout the merger control process, serving as strategic advisor and central Integration Management Office (IMO). This section outlines our key recommendations and best practices during the process.

Step 1: How to get things going
Before the start of the official merger review process, it is highly recommended to engage in pre-notification discussions with the respective antitrust authorities, putting them in a position to be well-informed and briefed, potentially reducing complications later in Phase I.

Furthermore, it is inevitable to ensure organizational readiness. This includes assembling an antitrust-focused team to handle the merger control procedures, aligning with the chosen law firm, relevant departments, and a strategy consultancy assisting the process. Moreover, the merger control team should seek regular alignment with higher management and the Executive Board for the process and frequently brief them on the likelihood of different scenarios and outcomes.

During the pre- notification phase, an in-depth internal market analysis must be conducted in cooperation with the legal counsel to anticipate potential antitrust concerns. Additionally, the team should already start gathering or at minimum ensure the availability of data that is likely to be requested by the authorities.

After preparing the initial analysis and gaining a first understanding of potential competition concerns, it is of utmost importance to develop a storyline for the planned transaction. However, communication about the process should be kept at a minimum.

Step 2: During the review process
Throughout the review phase, consistent and well-reasoned answers are crucial when responding to the various RFIs and EC decisions (e.g., statement of objections) – requiring close coordination across all relevant functions and business units within the company. Therefore, accompanying activities such as public and press relations, political support, and stakeholder management are vital. These measures can create a supportive environment around the proposed merger by addressing potential concerns and keeping stakeholders informed and aligned.

Moreover, thinking of potential remedies during the review process is a key element to reducing the risk of running out of time at the end. While developing the remedies, it is crucial to establish initial contact with potential remedy-takers to test the implementation and feasibility of the remedies and alleviate the theories of harm, especially on the routes of concern. This step shall ensure that the proposed remedies are practical and can be implemented without significant concerns. In doing so, it makes a difference to test the remedies with the EC as early as possible to get feedback and adjust the strategy if necessary. Finally, the merging parties should avoid a “stop the clock” scenario at all costs.

During the review process of a proposed merger, Lufthansa Consulting can support efficient progress by leveraging practices from previous project experience:

• Establishment of RFI handling process: Dedicated handling workflow between the project core team and line functions, ensuring clear ownership and responsibility to meet regulatory deadlines and maintain the momentum of the review process.
• Setup of central governance: Ensure unified data sources, tracking repetitive questions and quality gate checks.
• Assistance with research: Find clear answers and arguments for competition concerns that the authorities may address.
• Document management: Proper organization and easy retrieval of all documents are essential to responding to regulatory requests in a timely manner and ensuring a clean record of all communications and submissions.
• Identification of potential remedies: Analysis for the selection of potential remedies and development of negotiation space

Step 3: After the review process (case of conditional approval)
Following the review by the EC in the event of conditional approval, it is critical to apply several best practices to ensure a smooth transition and successful merger. Some key strategies and insights from Lufthansa Consulting include:

• Negotiation strategy: Negotiating with multiple potential remedy-takers to achieve the best possible outcomes and leverage in the talks.
• Liaising with the monitoring trustee: Facilitating a close working relationship with the monitoring trustee to ensure compliance and resolve issues promptly.
• Collaboration with the merging party: Supporting effective communication and cooperation with the transaction target to align objectives and ensure smooth integration.
• Early remedy development: Aiding the process of developing remedy agreements early on and planning thorough detailed discussions to avoid complications.

Parallel process: Multi-J stream
As mentioned above, multi-jurisdictional filings (Multi-J), which require simultaneous notifications to multiple competition authorities across jurisdictions, are both complex and crucial for global transactions. Centralized governance for multiple jurisdictions (Multi-J) is key to maintaining consistency in the data and efficiently managing deadlines. Appointing experienced local counsels ensures compliance with local requirements, provides legal insights, and supports specific cultural nuances that significantly affect the approval process. Lufthansa Consulting supports Multi-J efforts by:

• Spreading awareness: Informing the relevant teams about the status and developments in all jurisdictions while avoiding inconsistencies in the information provided.
• Proactive stakeholder management: Involving competition authorities early in the process to proactively identify potential issues before they become serious obstacles.
• Comprehensive risk management: Building a risk management plan that covers potential regulatory challenges and risk mitigation strategies and continuously updating this based on the evolving regulatory landscape.
• Monitoring thresholds: Additional jurisdictions may be added depending on the length of the process.

Parallel to the merger control process, the airline organization will most likely be working on the post-merger integration planning, which will be the focus of the third article in the Lufthansa Consulting M&A Editorial Series, soon to be published on this website.

To learn more and discuss how your organization could benefit from our expertise, please contact Vincent Hütte, Leader of the Solution Group Strategy and Organization or Tim Noack, Consultant in the Solution Group Strategy and Organization.

Authors:
Henri Kaps is Associate Consultant in the Solution Group Strategy and Organization at Lufthansa Consulting.
Robin Unger is Consultant in the Solution Group Strategy and Organization at Lufthansa Consulting.

 

Disclaimer – This article offers general information on aviation M&A as of July 2025. It is not a substitute for professional legal advice and does not claim completeness or ongoing accuracy. We are an aviation-management consultancy, not a law firm; no attorney-client relationship is formed. Always consult qualified counsel for before making any deal-specific decision.