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.
The European Commission has now opened an in-depth investigation to assess, under the EU Merger Regulation, the proposed acquisition. The Commission is concerned that the transaction may reduce competition in the market for passenger air transport services on several short-haul and long-haul routes in and out of Italy, since Lufthansa and ITA are strong and close competitors in the provision of passenger air transport services on certain routes to and from Italy.
We want to ensure that the acquisition of ITA does not reduce competition in short- and long-haul traffic and lead to higher prices, less capacity or lower quality for passenger air transport services in and out of Italy.
Margrethe Vestager, European Commission Executive Vice-President in charge of competition policy
In particular, the Commission found routes to Central Europe and North America to be at the highest risk of being affected. On certain such routes [to Central Europe], Lufthansa and ITA compete head-to-head with non-stop connections with only limited competition, primarily from low-cost carriers, such as Ryanair, who in many cases operate from more remote airports”, the Commission explained in a statement.
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 wants to asses 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 is also concentrating on 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.
On 8 January 2024, Lufthansa submitted commitments to address some of the concerns, however, the Commission found them insufficient in terms of both scope and effectiveness. The Commission now has 90 working days, until 6 June 2024, to decide whether the acquisition complies with the EU Merger Regulation or not.
