Talks between Lufthansa and Italy’s treasury about a partial ITA Airways takeover have been extended after the two parties failed to reach agreement within the original two-month timeline.
Back in January, a Letter of Intent and Memorandum of Understanding with the Italian Ministry of Economy and Finance established a two-month exclusivity clause for Lufthansa, which ran out on 24 April. Now an extension has been arranged until 12 May.
ITA Airways might be described as the phoenix that came out of the ashes of former Italian flag carrier since 1946, Alitalia, after its disastrous privatisation in 2009. Italy’s government was forced to go back on its word and renationalise after a failed auction and lack of profitability.
With its national carrier airline in need of capital investment, Italy’s new right-wing government gave the directive last December to make a minority stake sale and capital increases, with a view to eventual full divestment in ITA.
Lufthansa could be seen as a natural partner, having had a historical alliance with Alitalia and ITA and under the SkyTeam banner. The German group is initially expected to take on a minority 40% stake for at least €200 million, reserving the option to make a full takeover within three years.
Though the sale is delayed, there’s no reason why a deal should not be reached that is advantageous for both sides.
For Lufthansa, bringing ITA into the fold, alongside Austrian Airlines, Brussels Airlines and SWISS, would promote economies of scale on maintenance and purchases.
In addition, the acquisition presents a way of heading off heat from Air France-KLM and Delta in the Italian market. As well as routes to Buenos Aires and São Paulo which open up South America for Lufthansa, ITA could also prove to be an important gateway to an increased Lufthansa market share in India, the world’s fastest growing aviation market. Italy is a popular destination with Indian tourists and ITA already offers non-stop intercontinental flights to New Delhi, several times a week.
Meanwhile, benefits on the Italian side include the development of their main air-transport hubs, such as Rome Fiumicino. The bidding process entailed Lufthansa promising infrastructure enhancements as well as guaranteeing ITA access to key long-haul routes.
What’s more, the Italian government hopes ITA will in time match Lufthansa’s profitability and achieve €4 billion in revenue by 2027, according to Simple Flying.
EU antitrust regulators will be examining the deal carefully, among a raft of other deals in what is proving a shifting post-pandemic aeronautics industry.