Why EU's airline demands could keep further dealmaking on ice

It took a year of wrangling with the European Commission for Germany's Lufthansa to gain approval to buy 41% of Italy's ITA Airways, and only after it accepted big concessions. While the deal expands Lufthansa's footprint in the lucrative southern European market, the combined group will have to cede some routes and slots to rivals for it to proceed. Industry executives, investors and experts say greater scrutiny of such tie-ups by European regulators and demands for remedies could deter major airlines from further deals. British Airways-owner IAG has been in the crosshairs since 2019 when it announced plans to buy Spanish carrier Air Europa, with an EU deadline of Aug. 20 for concessions, while regulators are also expected to probe Air France-KLM's plan to buy 19.9% of Scandinavian carrier SAS. Airline executives have long said consolidation is needed to help offset soaring operating costs, helping carriers recover from the COVID-19 pandemic which brought global travel to a halt and the travel sector to the brink. But regulators worry Europe's three largest groups, IAG, Air France-KLM and Lufthansa, are becoming too dominant, potentially hurting consumer choice and making flying less affordable. "We can see that Europe is becoming more and more cautious about this wave of consolidation," said Piotr Grobelny at aviation data analysis firm IBA. The next candidate for privatisation is Portugal's TAP. But Lisbon's plans have been thrown off course by political turmoil, despite interest from Air France-KLM, Lufthansa and IAG.<br/>