The European Union has approved a deal allowing German airline Lufthansa to purchase a 41% stake in Italy’s state-owned ITA Airways for €325 million. This move will enable Lufthansa to expand its services in Italy, the third-largest travel market in Europe. If ITA’s financial performance improves, Lufthansa has the option to acquire full ownership of the airline. The EU’s approval comes after months of uncertainty surrounding the deal, with concerns about fair competition in the aviation sector.
Margrethe Vestager, the EU’s Executive Vice-President in charge of competition policy, emphasized the importance of maintaining competition in the aviation industry, especially during a time when consumers are facing increasing air travel prices. The EU required Lufthansa and ITA to offer up some short-haul routes in Italy to competitors in order to address competition concerns. This includes enabling rivals to operate non-stop flights between Rome or Milan and certain Central European airports. Lufthansa is currently in discussions with Easyjet and Volotea to facilitate this process.
Additionally, Lufthansa and ITA have agreed to collaborate with competitors to enhance connections and increase the frequency of non-stop long-haul flights. This cooperation will involve transferring passengers and baggage between connecting flights and exchanging takeoff and landing slots with other airlines. The deal is seen as a positive development for the Italian government, which is aiming to privatize certain public companies to bolster state finances. However, the merger cannot be finalized until rival airlines agree to participate in the anti-competition measures outlined in the agreement.
Despite gaining valuable market access through the acquisition of ITA, some analysts warn that the airline’s historical financial struggles could prove burdensome for Lufthansa. ITA has been incurring losses for decades, posing a challenge for the German airline’s efforts to turn the business around and make it profitable. This acquisition adds to Lufthansa’s portfolio of subsidiary airlines, which includes Brussels Airlines, Austrian Airlines, and Swiss International Air Lines. The merger between Lufthansa and ITA underscores the ongoing consolidation within the aviation industry and the efforts of airlines to expand their reach in strategic markets.
