It’s taken long enough but the Competition Authority of the European Commission approved the planned acquisition of 41 percent of Deutsche Lufthansa AG in ITA Airways
ITA Airways tail pre
It’s been in the works for some time, with the initial agreement between Lufthansa Group, the Italian Ministry of Economy and Finance (MEF) and ITA Airways which was agreed in May 2023.
With the clearance complete, Lufthansa Group will acquire a minority stake of 41 per cent in ITA Airways (Italia Trasporto Aereo S.p.A.) and the subsequent acquisition of the remaining shares by Deutsche Lufthansa AG for a capital contribution of 325 million euros,
The transaction is expected to close in the fourth quarter of 2024. Options for the acquisition of the remaining shares in ITA Airways have been agreed upon between Lufthansa Group and MEF and can be exercised from 2025 at the earliest.
Following the closing, ITA Airways is to become the fifth network airline to be closely integrated with Lufthansa Group while keeping its brand name ITA Airways. With it within the group, it will be able to access Lufthana’s group sales channels, the loyalty program Miles & More or also in aircraft and fuel purchasing.
According to Lufthansa, the purchase will strengthen and further develop the economic situation of ITA Airways, with Italy becoming Lufthansa Group’s fifth “home market”. It will then be the Lufthansa Group’s second-largest market in terms of revenue after Germany and the USA. Italy is already the second most important market for the company outside its home markets after the USA.
Integration
Lufthansa Group and ITA Airways are jointly planning a swift integration ITA Airways with its almost 5,000 employees will make the corporate culture of the Lufthansa Group even more international and diverse.
Rome-Fiumicino will become the Lufthansa Group’s sixth and geographically southernmost hub.
Immediately after the closing, the route networks are to be linked with each other through code sharing so that customers can combine the airlines’ offers. This will create over 1,000 new transfer options, creating many more options to destinations in South America, North Africa and the Middle East in particular. ITA Airways will also strengthen competition in Italy, which is currently characterized by a superior position of low-cost airlines.
ITA Airways will also move towards Star Alliance membership in the future, as well as harmonising systems with Lufthansa Group variants.
In Quotes
Carsten Spohr, Chief Executive Officer of Deutsche Lufthansa AG, says:
“The approval from Brussels is excellent news for ITA Airways and Lufthansa and especially for all passengers flying to and from Italy. We look forward to welcoming ITA Airways and its outstanding employees as a new member of our airline family very soon. The decision is also a clear signal for strong air traffic in Europe, which can successfully assert itself in global competition.”
He added
“The acquisition of ITA Airways strengthens the internationalization of the Lufthansa Group. We offer our guests a significantly greater choice of connections and destinations, and with the 5-star hub in Rome we are also extending our premium offering and better connecting strategic future markets south of the equator to our network. Despite the comprehensive and far-reaching concessions, the investment in ITA Airways strengthens the Lufthansa Group’s position in global competition. We will make ITA Airways a strong and successful part of our company and thus secure its future as an international airline and strong brand. ITA Airways will support us in further expanding our position as Number One in Europe.”
Appeasing the European Commission
There have been concessions by Lufthansa Group and ITA Airways to make this a reality.
Per the European Commission:
- Commitments for short-haul routes: Lufthansa and the MEF will make available to one or two rival airlines the necessary assets to enable them to start non-stop flights between Rome or Milan and certain airports in Central Europe. Remedy takers would need to operate on those routes for a certain minimum period. Lufthansa and the MEF will also ensure that one of those rival airlines will have access to ITA’s domestic network to offer indirect connections between certain airports in Central Europe and certain Italian cities other than Rome and Milan.
- Commitments for long-haul routes: The merged company will enter into agreements with rivals to improve their competitiveness on the long-haul routes of concern, for instance through interlining agreements or slot swaps. This will lead to increased frequencies of non-stop flights and/or improved connections for one-stop flights on each of the routes. In its assessment, the Commission took into account the fact that the MEF will retain a controlling stake in ITA after the transaction and will continue to have incentives to have ITA compete against Lufthansa’s joint venture partners in North America, at least until ITA is integrated into the joint venture.
- Commitments for Milan Linate airport: Lufthansa and MEF will transfer take-off and landing slots at Linate airport to the remedy takers for the short-haul routes. The number of slots to be divested exceeds what is necessary to operate the short-haul routes as well as the number of slots that the transaction would have added to ITA’s portfolio. This will allow the remedy taker to establish a sustainable base at Linate airport and to potentially offer its own one-stop connections between Italy and Central Europe.
Until the merger is complete, both Lufthansa Group and ITA Airways will continue to compete against each other until the minority stake is taken. Codeshare and integration will not commence until the transaction has been closed
Another crack at the Italian Market.
Lufthansa has been trying to crack Italy in different ways, with its regional carrier Air Dolimite and its failed subsidiary Lufthansa Italia.
With Aliltala failing and ITA Airways being born out of the ashes of it (and without the economic baggage of Aliatlia) and the European Commission appeased, its finally the step forward the Lufthansa has been seeking into to have a major position in the Italian Market.
We’ll have to see what things are planned for ITA Airways – it seems that even with concessions – Lufthansa Group has what it wants.
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“Lufthansa and the MEF can only implement the transaction following the Commission’s approval of suitable remedy takers for each of the short-haul, long-haul and Milan Linate commitments.”
My understanding there’s still this ‘hurdle’ they need to overcome – and nothing customer-facing will be implemented until they’ve received those approvals.
One of the key concessions made by Lufthansa is a commitment to offer additional flights from Rome to IAG and Air France KLM hub cities to improve long haul competition to North America.
So in the UK that’s London Heathrow… Alitalia gave most of their slots to Etihad so we’ll probably see Lufthansa transferring some theirs – they added to their stash of slots back in 2012 when they sold bmi to British Airways.