Summary

  • EU likely to approve Lufthansa’s ITA stake acquisition after the German airline group agrees to concessions.
  • Deal includes barring ITA from joining transatlantic joint venture and ceding Milan Linate slots.
  • Lufthansa firm on no more concessions, believes ITA may not survive without this deal.

Lufthansa’s proposed deal to acquire a 41% stake in Italian flag carrier ITA Airways looks set to receive EU approval, according to sources close to the matter. The deal has been held up as the European Commission (EC) is concerned about reduced competition, particularly on long-haul North Atlantic routes.

Lufthansa’s ITA deal likely to win EU approval

As reported by Reuters, the EC appears increasingly likely to grant its seal of approval for the proposed deal, according to three sources with direct knowledge of the matter. The competition regulator has yet to make a final decision but is said to be favorable towards the deal, with Lufthansa agreeing to key concessions to get things over the line.

Related

Lufthansa-ITA Airways Merger Plagued By Atlantic Joint Venture

Brussels does not wish to let ITA Airways join the Lufthansa Group-Air Canada-United Airlines transatlantic joint venture.

This includes barring ITA’s inclusion in the airline group’s “Atlantic Joint Venture” – also known as A++ – with Air Canada and United Airlines for at least two years, although a Politico report claims Brussels is said to be seeking a 10-year exclusion period.

united, lufthansa and ita planes

Photo: Fabian Joy | Shutterstock

Lufthansa has also agreed to concede slots at Milan Linate Airport, which will be shared between easyJet and Volotea – the EC has highlighted a total of 39 ITA routes it had competition concerns over, including 50% of the airline’s long-haul routes and dozens of European short and medium-haul services.

The initial phase of the deal will involve Lufthansa taking a 41% stake in the Italian airline for around €325 million ($348 million), with the option to acquire an additional 49% at a later date. Lufthansa believes that ITA may not survive if the deal isn’t pushed through, and is said to be working on final remedies to address remaining EC competition concerns.

No more concessions

The German carrier has signaled that it will not make any more concessions and has previously stated that it would pull out of the deal if the EC’s conditions are too severe.

The EC has pushed back its deadline for a decision from June 6th to July 4th, but we may get a final decision before the end of the month. Last week, Italy’s deputy prime minister Matteo Salvini said that an EU veto of the deal would be tantamount to a “serious attack on Italy” – the country is eager to relieve itself of the loss-making national carrier, and Lufthansa Group has a strong track record of turning struggling airlines around.

Related

EU Regulator Says Lufthansa Airlines, ITA Airways Deal Could Harm Competition

The EC expressed concerns about short-haul and long-haul competition from/to Italy, as well as ITA Airways’ dominance at Milan Linate Airport (LIN).

Should the deal go through, ITA’s fleet composition will integrate well with Lufthansa Group – the Italian airline currently operates an all-Airbus fleet consisting of the A220, A320-family, A330neo and A350, all of which are flown by Lufthansa’s and its subsidiaries except for the A330neo.

Do you think the Lufthansa-ITA Airways deal should go through? Let us know why in the comment section.

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