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FRANKFURT—The European Commission (EC) and Lufthansa are understood to have agreed on additional remedies that clear the way for the group’s planned investment in ITA Airways.
Industry sources confirmed that Lufthansa submitted a proposal for additional concessions earlier this week which were intended to alleviate the EC’s concerns about competition on long-haul routes. Neither the company nor the European competition authority commented on the matter.
Lufthansa plans to take an initial 41% stake in ITA and will also appoint its new CEO, therefore taking leadership in the carrier’s strategy and management. Full control is planned for whenever ITA becomes profitable. The transaction has been subject to intense scrutiny by the EC, which had also launched an in-depth investigation into its potential effects on competition.
Of late, long-haul routes were a particular concern. The EC is understood to have demanded that ITA be kept out of Lufthansa A++ transatlantic joint venture with United Airlines and Air Canada. Aviation Week’s sources said a compromise has now been found, but declined to reveal further details, which could still change. The EC has until July 4 to publish its decision and the two sides are likely to continue work on some aspects of their agreement until then.
Lufthansa plans to integrate ITA into its overarching group in the same way as Austrian Airlines, Brussels Airlines and Swiss. ITA will retain its own brand and separate management while core functions such as fleet procurement, group network management and sales are centralized. Rome-Fiumicino will become another hub in the Lufthansa Group system with a particular focus on Africa and Latin America.
ITA’s fleet fits well with Lufthansa requirements. The airline is currently taking delivery of more Airbus A320neos, A220s and A330neos. It also operates A350s. The A330neo is the only type no other Lufthansa Group carrier currently flies.
Lufthansa had looked at buying into former Italian airline Alitalia several times, but never went ahead. The launch of ITA made investment into an Italian legacy carrier a more attractive proposition. However, rebuilding ITA will be a challenging task given that it has continued to lose market share to LCCs on European routes with Ryanair leading and has a subscale long-haul operation.
Approval of the takeover is an encouraging signal to other European majors trying to become active in consolidation. International Airlines Group (IAG) has just submitted more concessions to the EC so its planned takeover of Air Europa can be approved. Air France is in the process of taking a minority stake in SAS Scandinavian Airlines. The Portuguese government is expected to formally launch the privatization of TAP Air Portugal soon.
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