The Office of Fair Trade (OFT) today cleared the anticipated acquisition by easyJet plc (easyJet) of GB Airways Limited (GB Airways).

The OFT has decided that the merger raises no competition concerns in any market. EasyJet and GB Airways overlap in the supply of scheduled passenger flights on certain routes from London Gatwick airport to 'sun and ski' destinations popular with leisure travellers, such as the Balearics (Ibiza, Palma and Mahon) and Innsbruck.

GB Airways operates these routes in accordance with a franchise agreement with British Airways plc (BA). This fact was significant in ruling out concerns based on the loss of potential competition on totally new routes in the future, because under the franchise agreement BA has a veto over new routes by GB Airways.

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Chloe MacEwen, OFT Deputy Director of Mergers said: "This is a prime example of how actual entry on all overlap routes can clearly resolve initial concerns. These examples demonstrate that when it comes to these routes, easyJet and its rivals - such as BA, Ryanair and Monarch - have been able to overcome any barriers to entry at various London airports.

"Some entry appears to be in response to the merger announcement itself, and there is every reason to conclude that expansion or further entry by rivals would deter sustained prices rises by easyJet post-merger."

As to the loss of actual competition on overlap routes, the OFT had initial concerns because the combined market shares were over 40 per cent in every case and there was some evidence to suggest that entry onto a route was difficult because it is hard to obtain additional capacity at London airports, or to move existing capacity from one route to another (so-called 'slot-flexing').

(GK)