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Week Ahead (22 January)

W/C Monday, 22 January – European Commission likely to announce decision on Lufthansa’s purchase of controlling stake in ITA Airways 

This week, the European Commission is likely to announce its decision on whether to allow Lufthansa’s purchase of a controlling stake in Italy’s ITA Airways, following the submission of a series of concessions. 


On 30 November, Lufthansa and the Italian government notified the European Commission of their agreement that will see the former acquire a 41% controlling minority stake for €325 million in the Italian national carrier, including an option for the German airline to acquire the remaining shares at a later date. However, the two parties did not receive a fast-track status for the deal, indicating potential antitrust considerations which led to concessions. Under the deal, aimed at strengthening Lufthansa's presence in southern Europe, ITA Airways, established as a successor to Alitalia, would transition from SkyTeam to Star Alliance. German Chancellor Olaf Scholz and Italian Prime Minister Giorgia Meloni have voiced support for the proposal. Nevertheless, the possibility of a challenging review process cannot be dismissed, following the return of Commissioner Margrethe Vestager to her role as the EU’s antitrust chief last month. 


Although the Commission’s deadline for Phase 1 of the deal is on 29 January, a decision could come this week. The EU antitrust regulator may clear the deal after the completion of the preliminary review this week or initiate a four-month investigation if serious concerns about competition distortion arise.  


Wednesday, 24 January – Deadline for the Commission’s decision on IAG’s acquisition of Air Europa, likely to lead to a Phase 2 probe 

On Wednesday, the European Commission is expected to announce its decision on International Airlines Group’s (IAG) acquisition of Air Europa. Last Wednesday, the deadline for IAG to offer potential concessions to the European Commission for its proposed deal expired, with the company opting against offering any remedies. However, IAG’s CEO stated that there will be a need for ‘’an ambitious and broad set of remedies’’, admitting that this will require additional time for the Commission to assess, outlining plans to present a series of remedies during Phase 2.  


Last year, IAG, the parent company of British Airways and Iberia, agreed to acquire the remaining 80% stake in Spanish low-cost airline Air Europa for €400 million. This marks IAG's second attempt at the deal, having abandoned a previous attempt in 2021 due to regulatory concerns. The acquisition is seen as a strategic move to enhance IAG's access to the Latin American market and position Madrid as a key European hub. However, concerns have been raised about the potential impact on ticket prices and competition on specific routes.   Thus, in the absence of early remedies, it is highly likely that the EU antitrust regulator will open a fourth-month in-depth investigation (Phase 2) into the proposed deal. 


IAG’s acquisition of Air Europa, along with Lufthansa’s proposed purchase of a controlling stake in ITA Airways are part of a series of airline merger deals that the Commission will examine in the coming weeks, indicating the direction of its competition policy for such deals.  


Wednesday, 24 January - European Commission to unveil its economic security package 

On Wednesday, the European Commission will unveil the EU’s economic security package. It will focus on increasing the bloc’s strategic oversight of foreign investments, covering sensitive aspects such as the screening of foreign investments, restrictions on exports, outbound investments, and research security. 


More specifically, the package will include a new proposal to update the EU's foreign direct investment screening (FDI) rules, following the adoption of a Regulation in 2019 allowing member states to set their own thresholds and rules. According to DG TRADE’s Damien Levie, the upcoming proposal is expected to focus on enhancing transparency, exchanging best practices, and potentially granting more authority to the Commission in this regard. 

Part of the package will also be a white paper outlining various options to advance research and development concerning dual-use technologies, serving both military and civil purposes. It will include plans to evaluate existing funding programmes to ensure they offer strategic support in addressing these challenges and will likely lead to the establishment of a dedicated fund for these technologies, namely quantum computing, semiconductors, artificial intelligence and biotech.  


The package will be in line with the Commission’s Economic Security Strategy, which was published last June as the EU’s first economic security doctrine. In addition to the Commission’s communication on critical technologies, published in October, these initiatives reflect the bloc’s quest for greater strategic autonomy in critical sectors, after pandemic supply chain shocks in the war in Ukraine prompted its own ‘’geopolitical awakening’’. 


However, the majority of these proposals will be presented in the form of opinions and recommendations, meaning a gradual transition into concrete pieces of legislation.  The effectiveness of these measures will hinge on the individual approaches adopted by EU member states for their implementation. Certain member states are critical of the Commission’s push for greater authority over export controls and risk assessments, which were previously the exclusive responsibility of national governments. Additionally, the EU's traditional backers of free trade, such as Sweden and the Netherlands, are also cautious about implementing outbound investment screening measures. 


Thursday, 25 January – ECB Governing Council to hold monetary policy meeting, expected to keep rates unchanged for a third consecutive time amid worsening economic outlook 

On Thursday, the ECB Governing Council (GC) meets to decide the next steps for Eurozone interest rates with another pause in rates priced in.  The meeting comes only a week after the news that Germany, the eurozone’s largest economy, contracted by 0.3% in 2023 due to persistent inflation, high energy prices, and weak foreign demand. The IMF expects the German economy to grow by only 0.9% in 2024, indicating a worsening economic outlook and sluggish growth prospects for the broader euro area.  


In its previous monetary policy meeting in December, the ECB’s GC decided to keep interest rates unchanged for a second consecutive time. Although there is still uncertainty regarding when the ECB will initiate easing, the latest significant decline in inflation, coupled with a weakening Eurozone economy, raised market expectations for an earlier than originally projected rate cut, possibly in Spring.  Also, earlier this month, ECB’s President Christine Lagarde stated that the ‘’hardest part is behind’’, adding that rate cuts could occur when there are clear indications that inflation has fallen to 2%.  


However, the minutes of its December meeting, released last week, indicated that the GC is still wary of inflation, with eurozone’s central bankers agreeing that monetary easing will most likely start taking place in its June meeting, provided that inflation has been tamed. Thus, there are challenges ahead complicating the ECB’s job. Core inflation has been more persistent, while wages are still growing at a rate of 4% year over year, exceeding the 2% inflation target. In addition, inflation rebounded in December, rising to 2.9%, ending a seven-month streak of declines and once again sparking rate-cut debates. In the event of a dramatic resurgence of energy and food prices, driven by an unforeseen geopolitical shock, the ECB may be forced to push back a rate cut until the second half of 2024. 


Thursday, 25 January - HSBC to defend its appeal against Commission’s fine in General Court hearing 

On Thursday, HSBC’s legal representatives will defend the bank’s appeal (Case T-561/21) against a fine imposed by the European Commission before the General Court, the EU’s lower court. 


In December 2016, the Commission concluded that HSBC, alongside Crédit Agricole and JPMorgan Chase, had participated in a single and continuous infringement restricting business practices and distorting competition in the Euro Interest Rate Derivatives (EIRD) sector. HSBC was imposed a fine of €33.6 million for that infringement. Subsequently, HSBC filed an appeal with the General Court, which largely upheld the Commission’s findings regarding its participation in the derivates cartel. However, it also annulled the imposed fine, citing insufficient reasons. In a January 2023 judgment, the CJEU upheld the annulment of the antitrust fine imposed on HSBC by the General Court, despite also confirming the bank’s participation in the cartel. 


As things currently stand, HSBC is not required to pay the originally imposed fine. However, the Commission in the meantime recalculated the amount, leading to a new €31.739 fine in 2021,  slightly lower than the €36.6 million fee. The Commission’s recalculated fine prompted the Bank’s latest appeal before the General Court, with the case scheduled to be heard this week. 




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