Lufthansa’s acquisition of ITA Airways was put on hold by an investigation form the European Commission deeming the deal would reduce competition for both transatlantic and intra-European routes. According to three anonymous sources close to the investigation, following several commitments made by Lufthansa, the regulators are likely to green light the acquisition.
1. Acquisition
At the beginning of 2022, Italy’s government officially authorized the privatization 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 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. 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, such as Ryanair, who in many cases 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 from and to 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.
3. Proposed solutions
To address these concerns, Lufthansa has 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 slots will be given to easyJet and Volotea.
“There was a change of pace, a positive approach on both sides”, one of the sources told Politico. Another person said some technical details were still open even as approval was expected, while the third said that talks are more positive, but that there are still outstanding issues.
An official decision is yet to be announced, but Lufthansa has said that if the deal is not approved by 4 July, it will retract its offer, which group CEO Carsten Spohr has called ITA’s only chance of survival.