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Lufthansa and Condor: An end to the long-standing pro-rate agreement is looming

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For decades, the cooperation between Lufthansa and Condor has been an indispensable part of the German aviation market. Now, however, an important chapter of this collaboration is threatening to end: Lufthansa plans to let the so-called "Special Pro-Rate Agreement" (SPA) with Condor expire on October 27, 2024.

This could have far-reaching consequences for the holiday airline Condor and raises questions about the future competitive landscape. At the heart of the events are economic and legal conflicts in which the Federal Cartel Office and political actors are also involved.

Background of the “Special Pro-Rate Agreement” (SPA)

The SPA is a special agreement that has secured Condor special conditions for feeder flights with Lufthansa for many years. In concrete terms, this meant that passengers who flew with Lufthansa to a larger hub such as Frankfurt, for example, could continue their journey with Condor from there with a through ticket.

This collaboration enabled Condor to access Lufthansa's extensive feeder network and benefit from cheaper fares for onward transportation of its passengers. Such collaborations are common in the aviation industry to offer travelers a seamless connection between different airlines. However, with the impending termination of the agreement, significant changes are now imminent.

A deep conflict between competitors

Lufthansa unilaterally terminated the SPA in 2021, which led to an initial escalation between the two airlines. The background to this was the introduction of Lufthansa's own holiday airline Discover Airlines, which was in direct competition with Condor. Both airlines offer flights from Frankfurt to popular holiday destinations, which is why competition between the two companies intensified. By terminating the SPA, Lufthansa could now deliberately weaken Condor by increasing the feeder costs for Condor passengers, which would put Condor at a significant competitive disadvantage.

To prevent this development, Condor contacted the Federal Cartel Office, which ultimately obliged Lufthansa to continue the agreement. But the legal dispute took a turn with a ruling by the Higher Regional Court (OLG) in Düsseldorf in May 2024.

Judgment of the Higher Regional Court of Düsseldorf: A setback for the Federal Cartel Office

The Düsseldorf Higher Regional Court overturned the Federal Cartel Office's ruling requiring Lufthansa to continue the SPA. The judges expressed "serious doubts" about the legality of the cartel authority's actions. In their reasoning, they pointed to a possible bias on the part of the Federal Cartel Office. According to the ruling, the proceedings were "not unaffected by political interests", with the Federal Ministry of Economics apparently playing a role in the background. This accusation of political influence represents a serious blow to the reputation of the Federal Cartel Office.

Another key point of criticism by the court concerned the delimitation of the relevant markets by the Federal Cartel Office. While the Federal Cartel Office defined the market based on the flight network, the Higher Regional Court stressed that a route-based delimitation was appropriate. Bus and train should also be considered as alternative means of transport, particularly on domestic routes. This view suggests that Condor is not dependent on Lufthansa's feeder flights, as there are alternative travel options to bring passengers to the larger hubs.

Impact on Competition and Consumers

The end of the SPA could have significant economic consequences for Condor. Without the special conditions for feeder flights, it could become more difficult for Condor to offer competitive prices. Condor could lose market share, particularly on long-haul routes where travelers first need a feeder flight. This development could mean that Condor has to concentrate more on departure airports outside of Frankfurt in order to maintain its position in the market.

For Lufthansa, however, the end of the agreement offers an opportunity to further strengthen its own holiday airline, Discover Airlines. By excluding Condor from feeder routes or forcing it to pay higher prices, Discover Airlines could gain market share. This could also have an impact on pricing for consumers, as less competition in certain segments could lead to higher ticket prices.

Open questions and ongoing negotiations

Despite the legal disputes and Lufthansa's clear intention to let the SPA expire, talks are still taking place between the two airlines. As the "Süddeutsche Zeitung" reports, negotiations are currently underway on a possible out-of-court settlement. It remains to be seen to what extent these negotiations will be successful. However, it is clear that economic, legal and political factors play a role in this decision.

A power struggle in German air traffic

The impending end of the SPA between Lufthansa and Condor is much more than an internal dispute between two airlines. It is a symbol of the increasing competition in the German air transport market and the growing influence of economic interests. While Lufthansa could strengthen its market position through the expiration of the agreement, Condor has a lot at stake. The legal disputes and political entanglements that accompany this case also raise questions about the role of the Federal Cartel Office and the influence of politics.

For passengers, it remains to be seen how this development will affect flight prices and connections. What is clear, however, is that the competitive landscape in German air transport could change considerably in the coming months.

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