Lufthansa, Italy ready remedies as EU antitrust warns on ITA Airways

By Foo Yun Chee and Inti Landauro

BRUSSELS (Reuters) - EU antitrust regulators warned on Monday that Lufthansa's intention to buy a minority stake in ITA Airways could harm competition and push up prices, prompting Italy and the German airline to come up with remedies in the coming weeks.

Lufthansa's plan to buy a 41% stake in state-owned ITA for 325 million euros ($351 million) underscores sector consolidation alongside British Airways-owner IAG's bid to buy out Spain's Air Europa.

The European Commission warned that the Lufthansa and ITA deal could leave users short-changed as it set out its concerns in a charge sheet known as a statement of objections.

"A risk of a competition issue is of course that prices go up and services go down," European Union Commissioner Margrethe Vestager told reporters. "That is what we mean when we say risk to competition: that users will have to pay," she added.

The EU antitrust watchdog said the deal threatened competition on short-haul routes between Italy and Central European countries, as well as on long-haul routes between Italy and the United States, Canada and Japan.

It would also strengthen ITA's dominant position at Milan's main airport, confirming a Reuters story earlier this month.

The Commission said, however, that its worries focused only on a small number of short and long-haul routes and passengers served by both airlines and their joint venture partners.

"The potential concerns do not affect the vast majority of routes that ITA operates," it added in a statement.

Lufthansa said it would present remedies to the Commission "in a timely manner" and that in its view the deal would strengthen competition in Europe and in Italy.

The deadline for remedies is April 26, while the EU has until June 6 to decide whether to clear or block the deal.

"We remain confident that ITA will become part of the Lufthansa group family this year," the German national carrier said in a statement.

The Italian Treasury said it would present remedies as soon as possible in order to secure the EU green light for the successor airline to bankrupt Alitalia.

Lufthansa's remedies could be similar to those in a Korean airline deal approved by the Commission which included ceding slots, traffic rights and planes to a rival, a person with direct knowledge of the deal has previously told Reuters.

Regulators also want to ensure that the rival acquiring such assets would start using them almost immediately before allowing airlines to close deals.

($1 = 0.9247 euros)

(Reporting by Foo Yun Chee and Inti Landauro, additional reporting by Giuseppe Fonte in Rome; editing by Kirsten Donovan, Mark Potter and Alexander Smith)