Lufthansa is finally allowed to take a stake in the Italian airline ITA Airways, the successor to Alitalia. The approval of the European Commission, which came Wednesday afternoon after a six-month investigation, is good news for the other two major European aviation blocs.
Both IAG (British Airways, Iberia, Vueling) and Air France-KLM also want to participate in smaller airlines. IAG has been chasing European approval to buy the Spanish budget airline Air Europa since 2019. Air France-KLM wants to take a stake of initially 19.9 percent in the Scandinavian SAS.
Concerns
The European Commission has reservations about such takeovers – even though aviation in Europe is much less concentrated than in the United States, for example. Brussels fears that takeovers of smaller companies will give the large airline groups too much market power and that prices for airline tickets on some routes will rise sharply. In the case of ITA and Lufthansa, this mainly concerns routes between Italy and destinations in Central Europe.
Now that the Commission has finally approved the German participation – and possibly a nearly complete takeover later – there is hope for IAG and Air France-KLM. Investors were at least satisfied with the European approval yesterday afternoon. Lufthansa shares were trading 2.6 percent higher than the opening price on Wednesday evening; IAG booked a daily gain of 4.8 percent and Air France-KLM rose 1.8 percent. The three prices also continued to rise slightly on Thursday morning.
Concessions
The European approval does come at a price. Lufthansa, which wants to pay 325 million euros for a 41 percent stake in ITA, has to make concessions. The group has to give up some European routes to and from Italy; Lufthansa is reportedly in talks with competitors easyJet and the Spanish budget airline Volotea for this. In addition, Lufthansa/ITA has to give up take-off and landing rights (slots) that the Italian company has at Milan’s Linate airport. This concerns 204 slots per week in the summer and 192 in the winter.
ITA (2023: 2.4 billion euros in turnover, 5 million euros in losses, 4,700 employees) is the successor to Alitalia, which has been struggling for decades. This Italian airline, which was also once of interest to Air France-KLM, went bankrupt in 2021. Between 2000 and 2020, the company made a loss of an estimated 11.4 billion euros. After the bankruptcy and the restart, ITA came fully into the hands of the Italian state.
For Lufthansa (2023: 35.4 billion euros turnover, 1.7 billion profit, 97,000 employees), the takeover means better access to Rome airport. The German giant wants to create a third hub there, in addition to Frankfurt and Munich. In addition, ITA offers Lufthansa more connections to Africa and Latin America. Incidentally, ITA is not the largest airline in Italy; that is the Irish budget airline Ryanair with a market share of 35 to 40 percent. ITA Airways has a share of around 10 percent.
In an interview with the Italian newspaper Corriere della Sera Lufthansa CEO Carsten Spohr said on Thursday that he will be wants to expand his share in ITA to 90 percent, as was agreed with the Italian government. Lufthansa also owns Austrian Airlines, Swiss, Brussels Airlines and Eurowings.
#Lufthansa #allowed #participate #Italian #airline #ITA