In-flight catering joint venture gets provisional clearance
7 Feb 2012
The Competition Commission (CC) has provisionally cleared the anticipated joint venture between Alpha Flight Group Limited (Alpha) and LSG Lufthansa Service Holding AG (LSG).
In a summary of its provisional findings report published today, the CC has stated that on balance the joint venture is unlikely to result in higher prices or lower quality for the companies’ airline customers.
The companies are major UK suppliers of in-flight catering to the airline industry, providing both hot meals and light snacks and related logistics for passenger flights in and out of the UK. Airlines’ catering requirements vary depending on whether they are long-haul or short-haul carriers with further differences between premium and economy passengers. As a result, the CC has looked at how the joint venture would affect competition in a number of different market segments, including distinguishing between Heathrow Airport, due to its larger number of long-haul flights, and other airports in the UK.
Malcolm Nicholson, Chairman of the Inquiry Group, said:
'Our main concern was the effect the joint venture would have on the most frequent long-haul airlines out of Heathrow—excepting BA which has a special status in this context. These are the most demanding customers to supply, in terms of their specific needs and capacity requirements, and the joint venture would reduce the number of ‘traditional’ suppliers to two. Whilst it was a finely-balanced judgement, we felt that DHL, a relatively new entrant with a different business model, was a sufficiently credible alternative to ensure adequate competition among three suppliers when these airlines are tendering for business.
'Elsewhere at Heathrow and other airports, the ability to choose between a number of other suppliers and the less complex catering requirements of short-haul flights means that airlines have several alternatives to the joint venture. The position of airlines has also been strengthened by the increasing tendency for different parts of the supply chain—for example, food preparation and delivery—to be supplied by different companies, which has enabled other companies to enter the market and increased airlines’ options.
'As a result, we think that there are sufficient safeguards across the board to ensure that airlines will not face higher prices or reduced quality as a result of the joint venture.'
The Office of Fair Trading (OFT) referred the case on 10 October and the CC has been asked to decide whether the acquisition may be expected to result in a substantial lessening of competition in any market or markets for goods or services in the UK. The CC is expected to publish its final report by 25 March 2012.
For the provisional findings summary and more details on the investigation, go to the inquiry homepage at: www.competition-commission.org.uk/our-work/alpha-flight-lsg-lufthansa. The full provisional findings report will be published shortly.
The CC would like to hear from all interested parties about the provisional findings, in writing, by 28 February 2012. To submit evidence, please email AlphaLSG@cc.gsi.gov.uk or write to:
Estelle Harvey
Inquiry Coordinator (Alpha/LSG)
Competition Commission
Victoria House
Southampton Row
LONDON
WC1B 4AD
Notes for editors
1. The CC is an independent public body, which carries out investigations into mergers, markets and the regulated industries.
2. The members of the Alpha/LSG Inquiry Group are: Malcolm Nicholson (Group Chairman), Roger Davis, Ian Jones and Stephen Oram.
3. The Enterprise Act 2002 empowers the OFT to refer to the CC completed or proposed mergers for investigation and report which create or enhance a 25 per cent share of supply in the UK (or a substantial part thereof) or where the UK turnover associated with the enterprise being acquired is over £70 million.
4. The CC has a 24-week period in which it is required to publish its report, which may be extended by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period.
5. Further information on this inquiry, including the terms of reference and other key documents, as well as on the CC and its procedures, including its policy on the provision of information and the disclosure of evidence, can be obtained from the CC website at: www.competition-commission.org.uk.
6. Enquiries should be directed to Rory Taylor or Siobhan Allen or by ringing 020 7271 0242.
