Lufthansa readies for EU antitrust warning over ITA deal, source says

By Foo Yun Chee

BRUSSELS (Reuters) - Lufthansa expects to get an EU antitrust warning in the coming weeks over its bid for a minority stake in ITA Airways and is prepared to offer targeted remedies to address competition concerns, a person with direct knowledge of the matter said.

The German carrier is seeking a 41% stake in the state-owned Italian rival for 325 million euros ($351.4 million) as part of a capital increase.

The European Commission opened a full-scale investigation into the deal in January on concerns that the acquisition could reduce competition in passenger air transport services on several short-haul and long-haul routes.

The EU competition enforcer will also examine whether ITA, Lufthansa and its joint venture partners United Airlines and Air Canada should be treated as a single entity after the merger.

Lufthansa expects a statement of objections from the Commission setting out in more details such concerns in mid-March, the person said.

Potential remedies could echo those in the Korean Air and Asiana deal which was cleared by the Commission only after they gave up slots, traffic rights and planes to allow a rival to operate on four overlapping routes, the person said.

Lufthansa had offered remedies during the EU watchdog's preliminary review of the deal but these were rejected after they failed to assuage regulatory concerns.

The Commission, which is due to decide on the deal by June 6, declined to comment.

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(Reporting by Foo Yun Chee, Editing by Louise Heavens)