The Bundeskartellamt, Germany's competition authority, has granted approval for Deutsche Lufthansa AG to acquire a 10% minority stake in airBaltic Corporation AS. This decision comes despite significant competitive concerns on several flight routes between German airports and the Baltic region, where both airlines compete directly.

Andreas Mundt, President of the Bundeskartellamt, noted that while the planned investment raises competitive issues due to the limited number of alternative carriers on these routes, the authority had to approve the merger because the affected routes are classified as 'marginal markets' with very low revenues. Under German law, the authority cannot intervene in such cases.

The minority stake acquisition includes additional rights for Lufthansa regarding decision-making at airBaltic. Furthermore, the two companies have agreed to significantly expand their existing wet lease cooperation in 2024, which involves airBaltic providing aircraft and crew to Lufthansa. The payments from Lufthansa are crucial for airBaltic, leading the authority to believe that Lufthansa will gain substantial influence over airBaltic's operations.

Despite this influence, both companies will remain legally independent, and any direct anti-competitive agreements or coordination between them will remain prohibited and could be subject to scrutiny by the Bundeskartellamt.

The merger control process focused on evaluating specific flight routes affected by the acquisition, which must have a domestic impact to be considered. Many of these routes show close competition between the two airlines, but the authority found that the merger would not significantly harm competition due to the low economic significance of the markets involved.

In the European wet lease market, the agreement between airBaltic and Lufthansa is deemed competitively neutral, as there are numerous alternative wet lease providers and large lessees in Europe, mitigating concerns of market foreclosure.

This merger was subject to German, rather than European, merger control. A notification to the European Commission would have been required only if Lufthansa were to gain control over airBaltic, which is not the case here. However, any future increase in Lufthansa's stake could trigger a new merger control review by the European Commission.