The Bundeskartellamt, Germany's competition authority, has cleared Deutsche Lufthansa AG's plans to acquire a 10% minority stake in airBaltic Corporation AS under merger control rules. This decision comes despite significant competition concerns regarding several flight connections between German airports and the Baltic states, where both airlines are direct competitors.

Andreas Mundt, President of the Bundeskartellamt, noted that while the acquisition raised competition issues, the affected routes were classified as minor markets with low domestic sales volumes. Under national merger provisions, the authority could not intervene in these minor markets, leading to the approval of the acquisition.

The minority stake will allow Lufthansa to participate in airBaltic's decision-making process, and the two companies have agreed to expand their wet-lease cooperation in 2024. This arrangement is crucial for airBaltic, as the lease payments from Lufthansa are significant for its operations. The Bundeskartellamt anticipates that Lufthansa's influence will be substantial in airBaltic's decisions post-acquisition.

Despite the merger, both airlines will remain separate legal entities, and any direct anti-competitive agreements or price coordination between them will be prohibited. The Bundeskartellamt has the authority to investigate any potential cartel agreements that may arise.

The merger control process focused on specific flight routes based on the European Commission's definitions. The authority could only assess routes with domestic effects, which included numerous connections between Germany and the Baltic states. Although competition concerns were identified on some routes, the merger could not be prohibited due to the minor market threshold, which was not exceeded.

In terms of the European wet-lease business, the agreement between airBaltic and Lufthansa does not raise competition concerns, as there are many alternative providers in the market. The Bundeskartellamt found that foreclosure effects are unlikely due to the presence of other large wet-lease operators in Europe.

This merger project was subject to German merger control rather than European control, as Lufthansa did not acquire control of airBaltic. However, if Lufthansa increases its shareholding in the future, it may trigger a new merger control proceeding by the European Commission.