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Lufthansa may take over Italian state airline Ita

Lufthansa may take over Italian state airline Ita
Lufthansa may take over Italian state airline Ita

A sigh of relief at Lufthansa and in Italy: The way is clear for the takeover of the company Ita. The EU has long feared higher ticket prices.

Lufthansa can join the Italian state-owned airline Ita. After a long review, the EU Commission has given the green light. However, the traditional company must meet a number of conditions. The competition watchdogs in Brussels have stipulated, among other things, that the partners give up take-off and landing rights in Milan-Linate and give new competitors on medium and long-haul routes a helping hand. Negotiations with competitors will also take place for this purpose.

In a first step, the MDax group will initially receive 41 percent of the shares in the former Alitalia. Over the next few years, the company could then be completely taken over. At midday, the two company bosses, Carsten Spohr and Antonino Turrichi, will jointly comment on the decision to the press in Rome. Italy’s Finance Minister Giancarlo Giorgetti will also be attending.

Lufthansa secures access to the Italian market after a long tug-of-war

Negotiations and reviews surrounding the entry of Europe’s highest-revenue airline group into its previous Italian competitor have been dragging on for more than a year. Italia Trasporto Aereo (ITA) emerged in 2020 from the state-owned airline Alitalia, which had repeatedly run into severe turbulence. The company currently has around 4,500 employees. By comparison, the Lufthansa Group currently has almost 99,000 employees and has already integrated three former state airlines in the past: Swiss, Austrian and Brussels Airways. The brands as well as the hubs in the home countries of Switzerland, Austria and Belgium have been retained. Ita is not the official legal successor to Alitalia, but has secured the rights to the legendary name, which, according to company circles, could soon be revived.

Lufthansa CEO Carsten Spohr had recently expressed optimism that he would receive approval from Brussels quickly. With the takeover, Lufthansa is gaining access to the Italian market, which is particularly lucrative due to its close ties to the USA. The fact that Ita is another airline that is being broken up into the Sky Team alliance dominated by Air France is a desired side effect.

Low-cost competition like Ryanair: Italy’s state airline Ita could not survive alone

According to many experts, Ita could not survive on its own. In its home market, it has been pushed into the background by low-cost airlines such as Ryanair and Easyjet. On the profitable routes across the Atlantic, it is struggling to compete with the power of the much larger US providers. This is much easier in a strong alliance such as with Lufthansa, as the EU Commission has also acknowledged.

It was precisely on this point that the EU competition authorities had raised concerns because Lufthansa also makes agreements with United and Air Canada in a joint venture over the North Atlantic. However, all other US carriers as well as Lufthansa’s European competitors IAG, British Airways and Air France-KLM are also active in the world’s most lucrative air transport market. In March, the Commission was convinced that the competitive pressure exerted by other airlines on routes between Italy and the USA and to and from Canada and Japan was negligible.

EU officials also had concerns that Lufthansa could concentrate too much market power on short-haul routes between Italy and central European countries. Although there is competition – primarily from companies such as Ryanair – such low-cost airlines often take off from remote airports. Lufthansa has also been active in northern Italy for years with its own regional airline Air Dolomiti.

EU Commission fears higher ticket prices

The EU Commission was particularly concerned about disadvantages for consumers. If there is little competition on routes and a lot of market power is concentrated in one provider, this provider can theoretically charge prices above the usual market level. Customers are then unable to switch to cheaper competitors or are only able to do so to a limited extent. This is another reason why there are strict competition rules in the EU.

Italy’s right-wing government under Prime Minister Giorgia Meloni has since suspected that other competitors wanted to slow down the takeover in Brussels. There were also open accusations from Rome against France and Air France.

Risk factor Italian government

Similar to Swiss, which was taken over in 2007, Ita is a restructured company that has gone through painful savings in terms of fleet and personnel. With joint purchasing and better planning, it could quickly make operating profits, say Lufthansa experts. And for 2027, the joint business plan of Lufthansa and the Rome Finance Ministry from the previous year already envisaged sales of 4.1 billion euros (2022: 1.6 billion).

The first installment of 325 million euros for 41 percent of the shares will be invested in the equity of the airline with 71 deep blue aircraft. The Italian state, a risk factor given the rapid change of government, will remain on board for the time being. From 2025, Lufthansa can exercise the option for a further 49 percent under precisely defined conditions and may even become the sole owner of the airline. The business development still needs to be assessed for the state to take over the remaining ten percent.

Lufthansa’s strategy chief Jörg Eberhart, who has already headed the regional subsidiary Air Dolomiti, which operates in northern Italy, for almost eight years, is being considered as the new head of ITA. He could join another Lufthansa employee on the five-member ITA board of directors.

Source: Stern

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