The European Commission has given a green light to the Lufthansa Group’s acquisition of a substantial stake in Italian carrier ITA Airways with a view to a subsequent takeover.
The Commission has approved Lufthansa’s purchase of a 41% stake in ITA, successor to Alitalia, subject to certain conditions including the release of slots at Milan Linate airport.
The transaction, which is set to be completed in the final quarter of this year, will see the Italian economic and finance ministry (MEF) initially retain majority control of ITA Airways. But the deal allows for a full takeover by Lufthansa from next year.
The acquisition, agreed with the Italian government in May last year, will see Lufthansa pay €325 million to complete the takeover.
Lufthansa said it plans a “swift integration” of ITA into its group, which comprises Lufhansa, Swiss, Austrian Airlines, Brussels Airlines and Eurowings.
Chief executive Carsten Spohr welcomed the approval as “excellent news for ITA Airways and Lufthansa and for all passengers flying to and from Italy”.
He said: “The decision is a clear signal for strong air traffic in Europe, which can successfully assert itself in global competition.”
The Italian MEF ministry and ITA Airways also welcomed the decision.
The EC said this followed an “in-depth investigation” of the proposed transaction as “Lufthansa and ITA operate an extensive network of routes from their respective hubs in Austria, Belgium, Germany, Switzerland and Italy [and] their operations are to a significant extent complementary”.
However, it noted: “Whilst ITA is performing well today, ITA’s long-term sustainability as a stand-alone carrier would have remained highly uncertain absent the transaction.”
Lufthansa said it agreed a package of concessions “following intensive negotiations with the European Commission”, including the transfer of slots at Milan-Linate Airport “to a competitor” on short-haul routes.
This rival carrier “will take over single routes on which Lufthansa Group airlines and ITA Airways operate today as competitors”.
The group also agreed to operate additional feeder flights from Rome to the hubs of European competitors to “ensure improved competition on long-haul routes from Rome to North America”.
Margrethe Vestager, EC executive vice-president in charge of competition policy, said: “At a time when consumers are facing increasingly higher prices for air travel, it is very important to preserve competition in the sector.”
She argued: “The package of remedies proposed by Lufthansa and the MEF on this cross-border deal fully addresses our competition concerns by ensuring that a sufficient level of competitive pressure remains on all relevant routes.”
Lufthansa said ITA will retain its brand name while benefiting from the airline group’s ‘synergies’, including its worldwide sales network, aircraft and fuel purchasing, and loyalty programme Miles & More.
It said the route networks will be linked as soon as the transaction closes and commercial processes, IT systems and purchasing processes “will be harmonised as quickly as possible”.
ITA Airways will also join the Star Alliance of carriers “in the near future”, having previously been a member of the SkyTeam alliance of Air France-KLM, Delta Air Lines and Virgin Atlantic.
The deal will make Italy Lufthansa Group’s fifth ‘home market’ and the largest by revenue after Germany and the US. Rome-Fiumicino will become the Lufthansa Group’s sixth and southernmost hub.
Italy is already the most important market for the group outside its home markets and the US.
Spohr argued: “The acquisition of ITA Airways strengthens the internationalisation of the Lufthansa Group.
“Despite comprehensive and far-reaching concessions, the investment in ITA Airways strengthens the Lufthansa Group’s position in global competition.”
He promised: “We will make ITA Airways a strong and successful part of our company and secure its future as an international airline and strong brand.”
The deal remains subject to approval by competition authorities outside the EU.
ITA Airways was founded in November 2020 following the winding up of Alitalia and began operations in October 2021.
The airline carried almost 15 million passengers last year. It has a modern fleet of 96 Airbus aircraft – 23 operating long haul and 73 short haul – flies to 69 destinations and employs almost 5,000 staff.