A thought experiment to begin with. Imagine your best friend owns an expensive sports car. Occasionally, he also takes your children to football practice. Therefore, when listing your assets, you have to include the friend's sports car in your asset list. Absurd? Not entirely, because this is somewhat similar to the situation Lufthansa is facing right now. Because it cooperates with United Airlines on some long-haul flights, the connections of the US carrier between North America and Europe are considered long-haul flights of Lufthansa in the eyes of the European Commission. This creates the impression that the service offerings of the German airline and ITA Airways, in which Lufthansa intends to invest, compete head to head. As a result, the EU competition watchdog looks set to block the deal if Lufthansa is not willing to make additional concessions.

The question remains whether it is actually a good idea from Lufthansa's perspective to invest in the Italian airline. The predecessor company Alitalia operated at a loss for decades, and the successor ITA Airways is also struggling. There is a lot of politics surrounding the deal, and Italian unions are known to be highly combative. Lufthansa already has its own subsidiary in Italy, Air Dolomiti, which could take on the tasks intended for ITA – namely, feeding long-haul flights from Frankfurt, Munich, Zurich, and Vienna. Hopefully, Lufthansa knows what it's doing, and it's not the task of competition authorities to prevent a company from engaging in economically nonsensical actions. Their role, one could argue, is rather to ensure efficient functioning markets in the EU by safeguarding competition. The question remains whether a Lufthansa/ITA combination impedes competition or not.

Certainly, an enlarged Lufthansa would inherently possess more market power. However, the truth is that even today, the three major airline groups in Europe – Lufthansa, IAG, and Air France-KLM – are so dominant that medium-sized competitors like ITA or TAP of Portugal only exist on the fringes. Moreover, they not only face competition from market leaders, but also from rapidly expanding low-cost carriers. Between nimble budget airlines and large airline blocs, companies like ITA, TAP, and many others have been caught in the crossfire for years. If they can't find a niche, they will disappear from the market – with all the negative consequences for the job markets in their respective home countries and their connectivity to the rest of the world, as well as for competition.

Moreover, if, for the aforementioned reasons, Lufthansa fails to acquire ITA in Italy, the same would apply to Air France-KLM and IAG. Because all major European airlines are primarily engaged in partnerships with US partners, according to the logic of the competition authority, they would likely not be considered buyers for ITA. Nor for TAP or other European airlines seeking mergers. Consolidation would come to a standstill.

To allay the concerns of the European Commission, Lufthansa would likely have to withdraw from the joint venture with United Airlines for transatlantic traffic. But this would render the business in this fiercely competitive market unviable for the German airline – too high a price for the ITA takeover.

Lufthansa CEO Carsten Spohr often preaches further consolidation as a panacea, pointing to the US market, where the five major players dominate – and thrive. Europe is not far from that point either, although Spohr continues to speak of fragmentation. That said, European competitors face stronger competition from the Middle East and Asia. To strengthen themselves for this global competition, acquisitions in Europe must continue to be possible.