THE Consumer Commission of Singapore (CCCS) has conditionally approved the proposed expansion of a 2016 joint venture between Singapore Airlines (SIA) and Lufthansa, which would give a boost to tourism in Singapore, among other benefits.
It would widen the geographic scope of a joint venture that the CCCS cleared in 2016, under which SIA and Lufthansa proposed to cooperate on the provision of air passenger services – including on pricing, sales and marketing and inventory management.
The expanded joint venture proposes to include more countries in the list of markets in which the two carriers provide scheduled air passenger services. It will also extend services operated by Swiss, Austrian Airlines and Scoot.
The expanded list of countries include more territories across Europe and other regions; these include Portugal, Iceland, Greece, Spain and the United Kingdom, as well as the Asia-Pacific, Vietnam and the Philippines.
The expanded joint venture would boost tourism and related industries in Singapore and enable more competitive fares, the CCCS said in a statement on Friday (Jan 31).
Other benefits include improved connectivity for both Lufthansa and SIA, and better utilisation of both parties’ assets.
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The competition watchdog said that it was granting its approval to the proposed expansion on the condition that both carriers adhere to a list of commitments to address concerns it raised.
These conditions include carrying a minimum number of Singapore passengers on the Singapore-Frankfurt, and the Singapore-Zurich routes in each calendar year, as well as maintaining seat capacity at stipulated levels on an aggregated basis on both routes.
The carriers are also to appoint an independent auditor to monitor their compliance with the commitments, and to submit a yearly report to the CCCS.
In December 2022, SIA and Lufthansa filed a joint application for a decision from CCCS on whether the proposed expansion would infringe Section 34 of the Competition Act 2004, which prohibits agreements or concerted practices that prevent, restrict or distort competition within any market in Singapore.
The concerns raised
When the CCCS commenced its review of the proposed expansion in August 2023, it flagged several competition concerns.
One was that the price and capacity coordination between the two carriers as a result of the expanded joint venture could restrict competition on affected routes.
It also assessed that the claimed benefits arising from the expanded joint venture were insufficient to outweigh the competition concerns in order for the net economic benefits exclusion under the Competition Act to apply.
It also pointed out that SIA and Lufthansa were the only two airlines that operated direct flights to and from Singapore across two routes – the Singapore-Frankfurt route and the Singapore-Zurich route. Both carriers have significant market shares on them.
Green light given
In November 2024, the CCCS held a consultation exercise to assess whether the proposed commitments would be enough to address competition concerns. Relevant stakeholders did not raise concerns with the commitments, the competition watchdog said.
After evaluating the feedback from the exercise, the CCCS determined that the proposed commitments would be sufficient to address the competition concerns arising from the expansion of the 2016 joint venture.
