Italy reorganised its ailing national carrier Alitalia as ITA Airways in 2021. While the government owns this airline, it has been trying to privatise it for the longest time. Lufthansa Group, now a conglomerate of European airlines, was one such suitor. The deal has been awaiting approval from the EU regulators for over a year.

The European Union has finally approved Lufthansa Group’s takeover of ITA Airways.

Lufthansa’s investment in ITA Airways

The Lufthansa Group will acquire a 41% stake in ITA Airways against a capital infusion of 325 million Euros. The transaction is intended to close in the fourth quarter of 2024. Along with this investment, Lufthansa will receive the right to acquire the remaining 59% equity of ITA Airways later (2025 onwards). Lufthansa eventually plans to acquire 100% of the carrier.

Lufthansa and ITA Airways must make the following concessions to see through this transaction.

• Lufthansa will have to make available to rival airlines “assets” to launch and operate flights between Rome/Milan and certain airports in Central Europe.
• Lufthansa and the merged entity must help rivals improve their competitiveness on the long-haul routes of concern through interlining agreements or slot swaps.
• Lufthansa and the merged entity will transfer slots at Milan Linate airport to remedy takers for the short-haul routes.

Carsten Spohr, Chief Executive Officer of Deutsche Lufthansa AG, said,

The approval from Brussels is excellent news for ITA Airways and Lufthansa and especially for all passengers flying to and from Italy. We look forward to welcoming ITA Airways and its outstanding employees as a new member of our airline family very soon. The decision is also a clear signal for strong air traffic in Europe, which can successfully assert itself in global competition.

The acquisition of ITA Airways strengthens the internationalization of the Lufthansa Group. We offer our guests a significantly greater choice of connections and destinations, and with the 5-star hub in Rome we are also extending our premium offering and better connecting strategic future markets south of the equator to our network. Despite the comprehensive and far-reaching concessions, the investment in ITA Airways strengthens the Lufthansa Group’s position in global competition. We will make ITA Airways a strong and successful part of our company and thus secure its future as an international airline and strong brand. ITA Airways will support us in further expanding our position as Number One in Europe.

Integration plans for ITA Airways into the group

After closing, ITA Airways will become the fifth network airline to be closely integrated with Lufthansa Group while keeping its brand name. As part of the multi-hub, multi-airline, and multi-brand system established by the Lufthansa Group, the Italian airline will utilise numerous synergies, for example, in worldwide sales, the loyalty program Miles & More, or aircraft and fuel purchasing.

This will strengthen and further develop ITA Airways’ economic situation. Italy will become the Lufthansa Group’s fifth “home market”. It will then be the Lufthansa Group’s second-largest market in terms of revenue after Germany and the USA.

Lufthansa Group and ITA Airways are jointly planning a swift integration of ITA Airways with its almost 5,000 employees. Rome-Fiumicino will become the Lufthansa Group’s sixth and geographically southernmost hub.

Immediately after the closing, the route networks will be linked through code sharing so that customers can combine the airlines’ offers. This will create over 1,000 new transfer options, many more to destinations in South America, North Africa, and the Middle East. ITA Airways will also strengthen competition in Italy, which is currently characterised by a superior position of low-cost airlines.

ITA Airways loyalty programme Volare members can also collect or use their miles with Miles & More. ITA Airways aims to join the Star Alliance shortly. Commercial processes, IT systems, and purchasing processes will be harmonised as quickly as possible to exploit the numerous synergy effects.

It is important to note that Lufthansa (Group) already owns Air Dolomiti, another Italian airline that Lufthansa already owns. I suspect it continues to operate independently, but we don’t know how to sustain it in the long run.

Bottomline

Lufthansa Group has received approval from the Italian government to acquire a 41% stake in Italy’s ITA Airways, with the ability to acquire a full 100% stake in due course of time. The first transaction for the 41% stake should be completed within the fourth quarter of 2024. Then, ITA Airways will become a Lufthansa Group airline and join Star Alliance. The airline will also transition to Miles & More as its frequent flyer programme.

What do you think of Lufthansa Group investing in ITA Airways?

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