OREANDA-NEWS. Navitaire and Amadeus are active worldwide in the provision of Passenger Service Systems ("PSS"), an IT tool used by airlines to internally manage reservations, inventory and departure control.

The Commission's investigation focused on actual and potential competition for PSS and whether Amadeus could use its position in the Global Distribution System market ("GDS", a different IT tool used by travel agencies to obtain information and make bookings with airlines) to disadvantage rivals or hinder innovation in the PSS market.

The Commission's investigation

Actual and potential competition for PSS

The PSS product market is highly differentiated, given that airlines with different business models have different needs. Amadeus' PSS is primarily designed to suit the needs of full service carriers, while Navitaire's PSS is mostly suited for low cost carriers. While both companies also serve "hybrid airlines" with a business model in-between full service and low cost, the Commission's investigation showed that Amadeus and Navitaire are currently not close competitors, since their products have different degrees of complexity and functionalities, which suit different types of customers also in the hybrid segment.

Moreover, information gathered during the investigation showed that, in the absence of the takeover, competition between the companies in the hybrid segment would not be materially different in the near future.

Incentives for bundling PSS and GDS

Amadeus is also active on the market for GDS. The Commission therefore assessed whether, as a result of the transaction, Amadeus could use its position in the GDS market in order to disadvantage its rivals in the PSS market, in particular by bundling or tying both products.

The investigation revealed that, as an integrated supplier of both PSS and GDS, Amadeus would already be in a position to bundle or tie those products. Moreover, Amadeus' incentives to do so are unlikely to change as a result of the transaction. This is because Navitaire's customers are predominantly low cost carriers or simple hybrid airlines that do not distribute via GDS to any material extent, so any bundling would be unprofitable with respect to these customers. In fact, direct distribution is core to Navitaire's offering and it is highly unlikely its customers would accept the restrictions in terms of marketing their products through channels such as airlines' websites or via applications program interface (used in mobile apps).

Innovation in the PSS and related markets

The Commission concluded that the transaction is unlikely to reduce innovation in the PSS market. Amadeus has a strong track record of investing in its PSS software and would have every interest to invest also in Navitaire's PSS software, which complements its own offering to a different type of customer.

Moreover, the Commission found that the transaction is unlikely to reduce innovation for "new distribution capability" ("NDC"). NDC is a new data transmission standard developed by IATA in 2012 and aimed at enhancing communication capabilities between airlines and travel agents. The market investigation indicated that NDC is still in an early development stage and the role of GDS suppliers in its functioning is not yet defined. Amadeus has publicly supported NDC and the acquisition of Navitaire would not change Amadeus' ability and incentives as regards NDC.

The Commission therefore concluded that the transaction would raise no competition concerns.

The case was referred to the Commission by the UK's Competition and Markets Authority in September 2015; the national competition authorities of Austria, Germany and Spain also joined this referral.

Companies and products

Amadeus IT Group S.A., based in Spain, offers IT solutions to airlines and travel agencies worldwide. Amadeus' activities focus on the provision of GDS services and internal IT solutions for airlines and airports, such as PSS.

Navitaire LLC is a US-based provider of IT solutions to airlines, such as PSS.

Merger control rules and procedures

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).