Following an investigation into the impact on competitiveness of Lufthansa’s acquisition of ITA Airways, the European Commission has green lit the deal, subject to several conditions that would ensure consumers will not be left without sufficient choice.
1. ITA privatisation
At the beginning of 2022, the Italian government officially authorised the privatisation of ITA (Italia Transporto Aereo) Airways, the successor to Alitalia. Over one year later, after heightened interest from multiple parties, Lufthansa Group confirmed reaching an agreement with the Italian Ministry of Economy and Finance (MEF) to acquire a minority stake in the national carrier, obtaining a 41% stake for €325 million.
Under the agreement, ITA would become the 5th airline in the Lufthansa Group, which currently encompasses Lufthansa, Eurowings, SWISS, Austrian Airlines and Brussels Airlines. At the time, the MEF also committed to a capital increase of €250 million into ITA and agreed on options to enable a potential acquisition of the remaining shares by Lufthansa at a later date.
2. Commission investigation
An investigation opened by the Commission in November 2023 found that, on certain routes to Central Europe, Lufthansa and ITA compete head-to-head on non-stop connections, with only limited competition, primarily from low-cost carriers, who operate from more remote airports, not Milan-Linate Airport, where ITA has a majority of the slots.
For routes to North America, no airline in the Lufthansa Group currently offers flights from Italy, however, the group does have a joint venture with United Airlines and Air Canada, through which they coordinate on price, capacity and scheduling and share revenues on transatlantic routes. The Commission wanted to further assess whether the activities of ITA, Lufthansa and its joint venture partners should be treated as those of a single entity after the merger, which could reduce competition on several long-haul routes between Italy and the US, Canada, Japan and India.
Domestically, the Commission was also worried about ITA’s dominant position at the Milan-Linate Airport, which could make it harder for rivals to provide passenger air transport services to and from the airport, and the reliance of other airlines on access to ITA’s domestic and short-haul network for their own operations, which could affect their services to international destinations also served by Lufthansa.
At a time when consumers are facing increasingly higher prices for air travel, it is very important to preserve competition in the sector.
Margrethe Vestager, European Commission Executive Vice-President in charge of competition policy
3. Conditional approval
“We have assessed very carefully whether the acquisition of a controlling stake in the new Italian flag carrier ITA by Europe’s largest network carrier Lufthansa would raise competition concerns. We needed to prevent that passengers end up paying more or end up with fewer and lower quality air transport services on certain routes in and out of Italy”, said Margrethe Vestager, European Commission Executive Vice-President in charge of competition policy.
To address these concerns, Lufthansa committed to keeping some of ITA’s intra-European routes on which they compete directly. Although no exact details have been revealed yet, several routes to Germany, Belgium, Switzerland and Austria will be maintained on ITA’s schedule. To steer off any transatlantic concerns, Lufthansa will not include ITA in its venture with United and Air Canada for two years, while regarding the slots at Milan-Linate Airport, 40 will be given to easyJet and Volotea.
Following the proposed solutions, the European Commission has approved the acquisition conditional upon full compliance with the remedies. Pursuant to the commitments, Lufthansa and the MEF can only implement the transaction following the Commission’s approval of suitable concrete remedy takers for each of the short-haul, long-haul and Milan Linate commitments. The Commission will assess the suitability of remedy takers in the context of a separate buyer approval procedure.
“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”, Vestager confirmed.
Therefore, the institution concluded that the transaction, as modified by the proposed remedies, would no longer raise competition concerns. The decision is conditional upon full compliance with the commitments, the implementation of which will be monitored by an independent trustee, under the supervision of the Commission.
