Offer to government in Rome
Lufthansa reaches for ITA Airways
01/18/2023 5:36 p.m
Has Lufthansa gotten a block on the leg? After a lot of back and forth, the airline family could soon have an addition from Italy. The group is about to join Alitalia’s successor ITA.
The German Lufthansa wants to take over the Italian airline ITA Airways. The group is initially aiming for a minority stake in Alitalia’s successor company and “options to purchase the remaining shares at a later date,” Lufthansa said. A corresponding offer was sent to the Italian government, which owns ITA Airways.
The airline’s sale has been pending for months. The government in Rome – then still under Prime Minister Mario Draghi – initially preferred an offer from the US investment fund Certares, which includes Air France-KLM and Delta Air Lines. A joint offer by Lufthansa together with the Swiss shipping group MSC had long been considered the favourite. However, the new government under Prime Minister Giorgia Meloni was skeptical of Air France-KLM’s offer. At the beginning of January, she reopened the negotiations and seemed to prefer Lufthansa as the buyer. MSC had meanwhile dropped out.
The German airline has now confirmed its interest in entering the Italian market alone. Air France-KLM had announced shortly before that it would no longer seek a stake in ITA Airways. The airline emerged from the insolvent airline Alitalia and is currently 100 percent owned by the Italian state. Rome joined Alitalia in 2017, but did not find an investor for a long time.
Analysts see significant risk
According to insiders, Lufthansa wants to buy a 40 percent stake in the Alitalia successor for 200 to 300 million euros as a first step. Negotiations with the Italian government should be completed in a few weeks. The Italian finance ministry wants to quickly sign a binding letter of intent with Lufthansa, followed by a decision by the state owner on a capital increase, according to people familiar with the process. Lufthansa stated that after the signing of the letter of intent, there would have to be further negotiations about the structure of a participation, the commercial and operational integration of ITA into the Lufthansa Airline Group and the resulting synergies.
With ITA Airways, Lufthansa, whose group also includes Eurowings, Austrian Airlines, Brussels Airlines and Swiss, could strengthen its position in its most important European foreign market. The Italian airline could expand its long-haul business. However, industry experts doubt a turning point in the airline’s long history of losses. “We believe there is a great risk that ITA will be a continuing disappointment for Lufthansa in the early years,” warned Ruxandra Haradau-Döser, analyst at Kepler Cheuvreux. “The market in Italy is extremely difficult,” explained the aviation expert. During the Corona crisis, ITA lost even more market share in European business to the low-cost airlines Ryanair, Wizz and Easyjet.