The EU Commission has approved the Lufthansa Group application to acquire a 41% stake in Alitalia successor, ITA Airways for 325 million euros. The Brussels decision was preceded by numerous concessions by Lufthansa to hand over existing slots in Rome and Milan to competitors. Through successive integration, Lufthansa is expanding its group and making Rome its sixth European hub after Frankfurt, Zurich, Vienna, Munich, and Brussels.
Spohr achieved his target
Lufthansa CEO, Carsten Spohr has finally reached his goal. For years, he has been trying to anchor his airline more firmly in Italy. First by acquiring a stake in the chronically loss-making Alitalia and then, following its insolvency, in its successor ITA Airways. After more than a year of negotiations with the Italian Ministry of Finance, the owner of ITA and, above all, the EU competition authority, Spohr, who has an affinity for Italy, has now achieved his target.
“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,” Mr. Spohr stated, following the EU Commission’s decision.
Painful concessions
By integrating ITA into the multi-brand and multi-hub Lufthansa Group, Lufthansa is strengthening its leading position as a passenger and cargo airline in Europe. The price for this, however, is a series of concessions demanded by the Brussels competition watchdogs for their approval of the merger. For example, ITA must give up slots at city-centered Milan Linate Airport to competitors, in order to prevent a dominant market position. EasyJet has already announced that it intends to set up a base at Linate.
In addition, Lufthansa and ITA have to hand over traffic rights for transatlantic flights at Rome Fiumicino Airport, to rivaling SkyTeam members: Air France-KLM and Delta Airlines. Both are two bitter pills for the Lufthansa Group, but probably bearable as Italy is Lufthansa’s strongest market outside Germany. This should now be further expanded, which also applies to air freight activities since northern Italy, in particular, is highly industrialized and therefore extremely attractive for the cargo business.
Air Dolomiti faces uncertain fate
“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,” Mr. Spohr declared.
To this end, talks are currently underway to include ITA in the Star Alliance airline grouping. Shortly after its foundation, the carrier joined the competing SkyTeam Alliance. However, it is still unclear what will become of the Lufthansa subsidiary (100%), Air Dolomiti, which mainly operates feeder flights from northern Italian cities to Munich. Whether the 1991-founded and Verona-based airline will remain part of the group’s multi-brand system might probably only be decided once Lufthansa increases its stake in ITA from 49% to 80% for a price of 800 million euros. This is expected to take place a year after closing. The Italian Ministry of Finance is to retain 20% of the ITA shares.
