OFT clears easyJet's acquisition of GB Airways

11/08 18 January 2008

The OFT today cleared the anticipated acquisition by easyJet plc (easyJet) of GB Airways Limited (GB Airways).

The OFT has decided that the merger raises no competition concerns in any market. easyJet and GB Airways overlap in the supply of scheduled passenger flights on certain routes from London Gatwick airport to 'sun and ski' destinations popular with leisure travellers, such as the Balearics (Ibiza, Palma and Mahon) and Innsbruck. GB Airways operates these routes in accordance with a franchise agreement with British Airways plc (BA). This fact was significant in ruling out concerns based on the loss of potential competition on totally new routes in the future, because under the franchise agreement BA has a veto over new routes by GB Airways.

As to the loss of actual competition on overlap routes, the OFT had initial concerns because the combined market shares were over 40 per cent in every case and there was some evidence to suggest that entry onto a route was difficult because it is hard to obtain additional capacity at London airports, or to move existing capacity from one route to another (so-called 'slot-flexing').

Chloé MacEwen, OFT Deputy Director of Mergers, said:

'This is a prime example of how actual entry on all overlap routes can clearly resolve initial concerns. These examples demonstrate that when it comes to these routes, easyJet and its rivals - such as BA, Ryanair and Monarch - have been able to overcome any barriers to entry at various London airports. Some entry appears to be in response to the merger announcement itself, and there is every reason to conclude that expansion or further entry by rivals would deter sustained price rises by easyJet post-merger.'

NOTES

1. The Reference Test - the OFT has a duty to make a reference to the Competition Commission if the OFT believes that it is or may be the case that a relevant merger situation has been created; and the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

2. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.

3. The full text of this decision will appear in the mergers section.

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