Lufthansa Group and Italian Government reach agreement on ITA Airlines

Lufthansa Group Italy's Ministry of Economy and Finance (Ministero dell'Economia e delle Finanze, MEF) has reached an agreement to complete the initial part of the group's merger with MEF's ITA airline.

No change in price

In a statement on November 11, MEF Confirmation that Lufthansa Group and the ministry have submitted a package of remedies to the European Commission (EC) regarding the German group's acquisition of an initial stake in the company Alitalia.

“We are awaiting with confidence the final approval from the European Commission in order to proceed with the completion of the transaction. As far as the signed agreement is concerned, the economic conditions envisaged have not changed.”

In a statement to Simple Flying, Lufthansa Group also confirmed that a remedy package has been submitted to the European Commission to satisfy the conditions for approving the merger.

“The submission was completed jointly with the Italian Ministry of Economy and Finance (MEF) on November 11, 2024. The Lufthansa Group is confident that the European Commission will approve the remedy package in the coming weeks.”

when European Community Approves the merger and expresses ITA Airways' ability to continue operating as an independent airline “If there's no deal, it's highly uncertain.”

However, Lufthansa Group and MEF must agree to the remedies proposed by the EC, namely:

• Allow one or two rival airlines to launch direct flights between Rome and Milan and certain Central European airports
• Improve competitive conditions on transatlantic routes (the European Commission considered Lufthansa’s star alliance Partners United Airlines and air canada and assess their activities as a single entity when combined)
• Abandoned Milan Linate Airport (LIN) flight schedules

The deal (almost) fell apart

According to previous reports by Italian media Corriere della SeraMEF's rejection could lower the price of Alitalia's initial 41% stake, people familiar with the matter were quoted as saying.

Previous reports in the Italian outlet added that the price dispute could put an end to the planned merger, with MEF having no problem abandoning the deal if it was not in Italy's interests.

When Lufthansa Group and MEF agreed to acquire 41% of ITA Airlines in May 2023, the initial equity price was set at 325 million euros ($345.1 million) through a capital increase. In addition, MEF will inject 250 million euros ($265.5 million) into the Italian airline through a capital increase.

An announcement at the time said the airline group had the option to later acquire the remaining 59% stake.

“The purchase price of the remaining shares will be determined based on the business development of ITA Airlines.”

polycentric strategy

When Lufthansa Group announced the deal, the company emphasized that ITA Airlines and its Rome Leonardo da Vinci-Fiumicino Airport (FCO) will become the fifth network airline in the group's multi-brand, multi-hub model.

also Lufthansa (airline), the group also owns Austrian Airlines, Brussels Airlinesand Swiss International Air Lines ( SWISS), and casual vectors such as discover airlines.

Lufthansa City Airlines and Air Dolomiti also offer regional services to Lufthansa, while eurowings Covering the group's short-haul, low-cost capacity across Europe.

Responding to a question about travel demand during the company's third-quarter earnings call, Lufthansa Group CEO Carsten Spohr said the group doesn't see it that way when it comes to demand for different airline services. . .

“We are now integrating our hubs in some way […] 80% of our intercontinental connecting passengers are already traveling to their destinations [through] More than one hub. “

Up to 10% of the group's passengers can use all five hubs, Spohr added, referring to Lufthansa's two hubs in Germany, namely frankfurt airport (France) and Munich Airport (MUC), Brussels Airport (BRU), Vienna Airport (VIE) and Zurich Airport (ZRH).