Lufthansa Group has been cleared to acquire a minority shareholding in Latvian carrier Air Baltic by the German competition regulator, despite concerns over the effect on certain routes.

Earlier this year, Lufthansa disclosed that it would take a convertible 10% stake in the airline, ahead of a planned share issue.

While Lufthansa is not taking control of Air Baltic, under German legislation the minority stake is sufficient to subject the arrangement to competition scrutiny.

The federal Bundeskartellamt acknowledges that the acquisition “raises significant competition concerns” on “several routes” between Germany and the Baltic states, given the lack of alternative operators.

But Bundeskartellamt president Andreas Mundt says the regulator “cannot intervene” because the affected routes generate “very low revenues”.

On routes with low economic importance – less than €20 million ($23.6 million) in domestic sales – a ‘de minimis’ market clause applies to merger control, and a tie-up cannot be blocked.

This means the acquisition “had to be approved”, says Mundt.

Lufthansa Group will have decision-making rights regarding Air Baltic’s strategy and the two operators have agreed to expand their wet-lease activity under which Air Baltic supplies Airbus A220 aircraft to Lufthansa.

While the wet-lease pact raises no issues, the Bundeskartellamt nevertheless believes Lufthansa will “gain significant competitive influence” over Air Baltic.

“It is to be expected that Air Baltic will significantly consider the interests of [Lufthansa] in its decision-making,” it states.

“However, the companies will remain legally independent.”

It warns that direct co-ordination and anti-competitive agreements between them “remain prohibited”.