Lufthansa has experience in taking over former state airlines. The Italian Ita could be as successful as Swiss, boss Carsten Spohr hopes. But first there are a few hurdles.
With the entry into the Italian state airline Ita Airways, a major challenge begins for Lufthansa boss Carsten Spohr and his management. According to the CEO, the deal was no longer really about money, given the strategic dimension. After the agreement with the government in Rome, the potential Dax climber gradually takes over the state carrier of the third largest EU economy, breaks another airline from the Air France-dominated “Sky Team” alliance and gains access to a billion-dollar market. But with the long-prepared step to Italy, the problems in the group, which wants to be less dependent on the German home market, are also growing.
Spohr likes to describe Ita, which has shrunk out of its predecessor Alitalia, as a start-up in a middle development phase. So it doesn’t seem that important that the airline, which started in autumn 2021 in the middle of the Corona crisis, has only flown losses so far. With quick savings opportunities in the group of companies through joint purchasing and better planning, it should fly in operational profits as early as 2025. And for 2027, the joint business plan of Lufthansa and the Roman Ministry of Finance already envisages sales of 4.1 billion euros (2022: 1.6 billion).
The Italian state remains on board for the time being
325 million euros are to flow as the first installment for 41 percent of the shares in the equity of the airline with 71 aircraft painted deep blue. The Italian state, a risk factor in view of the rapid change of government, will remain on board for a few more years. Even from 2025, when Lufthansa can exercise the option for a further 49 percent under precisely defined conditions, the then incumbent finance minister will remain co-pilot with the remaining 10 percent.
Nevertheless, Captain Spohr feels adequately secured: The path to full takeover is clearly contractually agreed and is also a clear goal of the company. On the other hand, Lufthansa cannot be forced to fully integrate Ita if the figures are not correct. The total price for the Ita is reported in the Italian media to be 830 million euros, without Spohr confirming this figure. The company is also protected from economic and legal risks associated with Ita’s predecessor Alitalia, he emphasizes.
Lufthansa strategy chief Jörg Eberhart, who has already headed the regional subsidiary Air Dolomiti active in northern Italy, is under discussion as the new Ita boss. He is to move into the five-strong Ita board of directors with another Lufthansa employee. After Austrian, Swiss and Brussels Airlines, Ita would be the fourth state airline in a neighboring country to land in the Lufthansa Group in a privatized form.
Reactions in Italy
In Italy, the deal was largely positively received. After being used to Alitalia numbers in the red and state aid south of the Alps for a long time, the hopes of the aviation giants from Frankfurt are high. After “years of failure and babble,” workers and travelers are “finally safe,” tweeted Transport Minister Matteo Salvini. Above all, the Italians want their airports in Rome and Milan to be upgraded as hubs to Africa or South America, for example.
On Friday, Spohr made something undiplomatically clear: Milan will not become a hub for intercontinental flights, despite its high economic power and large customer potential. High-quality point-to-point connections are its offer from Milan-Linate.
“Even Rome can only grow at the expense of other Lufthansa hubs,” says aviation consultant Gerald Wissel. He points to a fundamental problem: Ita is in serious competition with the already established brands and hubs of the Lufthansa Group. There is a risk of snatching customers from each other if there is not a stronger central control that decides whether a guest from Milan flies to the USA via Munich or via Rome. Among other things, this requires a deep integration of the IT systems, which has not really succeeded in the smaller network up to now.
Unions relieved about Lufthansa entry
The Italian unions were relieved about the entry and the upcoming takeover of Ita by Lufthansa. They are concerned with creating new jobs by expanding the fleet, especially for around 3,700 former Alitalia employees who have been in the wage compensation fund since autumn 2021. The Ita workforce should only increase from the current 4,300 to more than 5,500 people.
A risk for the Lufthansa plans is the forthcoming competition control of the deal by the EU Commission. The Brussels officials would take a closer look than usual, adviser Wissel expects. Finally, courts have rejected the EU approvals for several corona aids from European countries to airlines as unlawful. It is at least questionable whether it would have been enough to hand over some take-off and landing rights in Rome and Milan when ita entered the company. Spohr points to Ita’s weak market position in its home market, where Ryanair and other low-cost airlines have long been the dominant force on short-haul routes. Italy’s Finance Minister Giancarlo Giorgetti used an Italian proverb in hopes of a successful future: “If they are roses, they will bloom.”
Ad hoc Lufthansa announcement Lufthansa
Source: Stern
