EU approves Lufthansa – ITA merger

The picture speaks for itself. There is a small gap between the current Lufthansa Airlines family, which consists of five members, and ITA Airways. This is because Lufthansa is initially only acquiring a 41%minority stake in ITA, with the option of increasing its share in 2025. The step was okayed by the EU competition authorities today (03JUL24). This puts an end to the months-long tug-of-war over the approval of the acquisition during which the Lufthansa/ITA duo had to concede a variety of conditions, such as the waiver of route rights for competition reasons.

Note the small gap between the 5 group members of Lufthansa and ITA  –  courtesy: LH Group

Although the transaction is still subject to conditions, the Lufthansa Group, the Italian Ministry of Economy and Finance (MEF), and ITA Airways have expressly welcomed the EU Commission’s approval under competition law. Carsten Spohr, CEO of Deutsche Lufthansa AG said: “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.”

Observers expect that the swift integration of ITA into the Lufthansa Group is likely to begin before the final closing.

No cargo decision yet
It remains to be seen whether this will apply to all business areas – primarily passenger but also technical services and air freight matters. CargoForwarder Global asked Lufthansa Cargo Corporate Communications for a clear statement and received this response: “Lufthansa Cargo is currently investigating possible future cooperation in the marketing of belly capacity. However, we are unable to provide any details at this time.” Period!

The question therefore remains as to whether the Swiss model will apply to ITA Cargo in future, i.e. whether it will be responsible for its own air freight business or, alternatively, that the sale of belly capacity will be managed centrally by Lufthansa Cargo, as practiced at Austrian Airlines, Brussels Airlines, Discovery, or Eurowings.

Whatever the decision will be, with the ITA hubs Rome and above all, Milan, the Lufthansa Group has two more strong traffic hubs on its list. Both are attractive destinations and transit centers from the point of view of shippers and freight forwarders.

In an immediate reaction to the decision of the Brussels policymakers, the Lufthansa Group, the Italian Ministry of Economy and Finance (MEF), and ITA Airways have expressly welcomed the EU Commission’s approval under competition law. With this clearance of the competition authority, the way is now clear for the acquisition of a minority stake of 41% in ITA Airways (Italia Trasporto Aereo S.p.A.) and the subsequent acquisition of the remaining shares by Deutsche Lufthansa AG for a capital contribution of 325 million euros, which was already agreed in MAY23.

Market consolidation
The Brussels Commission’s decision is a further step towards the consolidation of European passenger and air freight traffic. In addition to the low-cost sector, led by Ryanair, Wizz Air and easyJet, three large blocks dominated by traditional airlines are emerging: the IAG Group around British Airways/Iberia, Air France-KLM-SAS, and Lufthansa with its various subsidiaries. It is still unclear which of these groups TAP Portugal will join. All three have expressed an interest.

Lufthansa announced that its investment will be completed through a capital increase. The transaction is expected to close in the fourth quarter of 2024. This requires both the prior implementation of the remedies negotiated with the EU Commission and the approval of other competition authorities outside the EU. Options for the acquisition of the remaining shares in ITA Airways have been agreed between Lufthansa Group and Italy’s Finance Ministry, and can be exercised from 2025 at the earliest.

Fifth home market
This will strengthen and further develop the economic situation of ITA Airways, forecasts Lufthansa management. 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. Italy is already the second most important market for the company outside its home markets after the USA. In terms of gross domestic product, Italy is the third largest economy in Europe, concentrated particularly in the North of the country, with a strongly export-oriented economy and one of the most popular vacation destinations worldwide.

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