Countless rounds of negotiations have taken place and in between it looked as if all efforts were from the point of view of the Lufthansa been in vain. But now it is apparently becoming concrete: According to information from industry circles, the group will present a takeover bid for the new Italian airline ITA Airways this Wednesday. A competitor is currently not in sight.
According to reports, Lufthansa will initially buy a minority stake in the airline, but has the option of fully acquiring ITA at a later date. Initially, there is a purchase price of around 300 million euros for a share of around 40 percent, figures that neither Lufthansa nor the Italian government comment on. After the offer has been received, both sides are said to have six weeks to sign a final purchase agreement.
Lufthansa had taken over several airlines in the European Union in the past 15 years. The group includes Austrian Airlines, Swiss and Brussels Airlines. The airlines were allowed to keep their own brands and local management, but certain functions such as aircraft purchasing are heavily centralized in the group. ITA Airways is now to be integrated according to the same pattern.
After the USA, Italy is the second most important market for Lufthansa outside of Germany. An attempt to set up its own branch with Lufthansa Italia failed years ago. The regional airline Air Dolomiti, which connects Italian cities to the hubs in Frankfurt and Munich, is currently part of the group. “The Italian market is of course attractive,” says Accenture aviation expert Andreas Jahnke. According to Jahnke, Lufthansa is also faced with the question of where it can still grow when the potential for strong expansion in its home market of Germany seems to have been exhausted.
It turned out that ITA would only have a chance of surviving as part of a group
ITA is the unofficial successor company to the former Italian state line Alitalia, which was notorious for decades of high losses that could only be offset by billions in subsidies. Under former CEO Wolfgang Mayrhuber, Lufthansa was once on the verge of taking over Alitalia despite everything, only a veto by its own supervisory board prevented the deal. The corona pandemic then meant the final end for Alitalia, but the Italian state founded ITA – without the old debts of the predecessor and again with start-up aid of 1.35 billion euros approved by the European Commission. ITA started scheduled services at the end of 2020, ordered almost 60 aircraft from Airbus and leasing companies and has been posting high initial losses ever since. It soon became apparent that ITA would only have a chance of surviving as part of a group.
In the summer of 2022, the previous government under Prime Minister Mario Draghi preferred a consortium led by the American financial investor Certares and Air France-KLM to Lufthansa. But the group missed a deadline for exclusive negotiations without a result and has not yet made a new offer. Lufthansa was back in the running.
The fact that ITA’s economic situation has continued to deteriorate since then plays into Lufthansa’s hands. The purchase price has reportedly fallen further. In addition, Lufthansa insisted from the outset on being in charge of the business, regardless of the size of the stake. Even the new, extremely right-wing government under Prime Minister Georgia Meloni now seems to be getting involved. Details of the agreement have not yet leaked out. “There are good reasons for long negotiations,” says Accenture consultant Jahnke.
For the Lufthansa Group, the integration means growth, but also more complexity and uncertainty. The group already has to distribute aircraft and other resources to five hubs (Frankfurt, Munich, Vienna, Zurich and Brussels) and put together a sensible route network for the five locations. Should the ITA takeover really work out, Rome and Milan are likely to be added to two more locations where long-haul aircraft will have to be stationed. In European traffic, ITA competes primarily with Ryanair, which now has a market share of around 40 percent in Italy. It is therefore questionable how ITA, which uses structures from the old Alitalia, can earn money on short and medium-haul routes.