Lufthansa Submits Offer For ITA Airways Stake
Lufthansa Group has submitted its long-awaited offer for ITA Airways to the Italian government, officially stepping into the long-running saga of what entity will own and manage Italy’s national airline.
“Deutsche Lufthansa AG is aiming to acquire a stake in the Italian national carrier ITA Airways,” the German group said in a statement Jan. 18. “The plan is to agree on the initial acquisition of a minority stake as well as on options to purchase the remaining shares at a later date.”
The move represents a big step forward in the convoluted ITA Airways sale process. ITA is the successor to Italian flag carrier Alitalia, which filed for bankruptcy in 2017 but failed to find an investor. The Italian government nationalized the airline during the coronavirus pandemic and has been seeking an investor for the slimmed down ITA Airways, which launched in October 2021 and operates a fleet that includes Airbus A350s and A220s.
Lufthansa submitted an offer to Italy’s Ministry of Economy and Finance to conclude a Memorandum of Understanding (MOU). “Contingent on both parties signing this MOU, further negotiations and discussions would be conducted on an exclusive basis,” the airline said. “These talks would primarily focus on the form of a possible equity investment, the commercial and operational integration of ITA into the Lufthansa Airline Group, as well as resulting synergies. In case of a binding agreement is reached, its implementation would be subject to approval by the relevant authorities.”
The Italian government confirmed no other offers were submitted. “The Ministry of Economy and Finance has received a letter of intent from Deutsche Lufthansa AG to acquire a minority stake in ITA Airways,” the Italian government said in a statement. The Ministry said it would examine whether the offer met the requirements set out in the decree that paves the way for the sale, which was published earlier in January. “No other offers arrived by the deadline of 6 p.m. Jan. 18,” the Ministry added.
The last time exclusive talks on the possible sale of ITA Airways were held, in 2022, it seemed to mark the end of Lufthansa’s hopes to buy into the airline. At the time, a consortium made up of Certares, Air France-KLM and Delta Air Lines was selected for exclusive talks, with Lufthansa, which was then in partnership with shipping group MSC, knocked out of the race. But those exclusive talks ended without at a deal, and Lufthansa returned to the running, this time alone as its partner MSC said it was no longer interested in ITA.
Lufthansa explained the rationale behind its pursuit of ITA. “For Lufthansa Group, Italy is the most important market outside of its home markets and the U.S.,” the company said. “Italy’s importance for both business and private travel lies in its strong export-oriented economy and status as one of Europe’s top vacation spots.”
The Italian market has seen LCCs such as Ryanair—which has 40% market share and 17 bases in Italy—flourish in recent years, and that strong LCC growth was one of the reasons that led to Alitalia’s bankruptcy filing.
Lufthansa already has a foothold in the Italian market Air Dolomiti but has consistently emphasized its interest in a greater slice of the market. Analysts see the acquisition as a big challenge for the airline group. “Acquiring ITA is one of the most challenging propositions in European aviation,” Bernstein analyst Alex Irving wrote after the deal was announced. “The airline has been persistently loss-making, and airlines have invested minority stakes before (i.e., Etihad, Air France) that have lost their value. If anything, the backdrop is becoming even more challenging, especially on short-haul, as Ryanair and Wizz have added as much capacity to Italy as they realistically can.”
Irving added: “Yes, Italy is an important, attractive market—but the successful restructuring of ITA into a sustainably profitable airline is far from assured. If the deal closes, we look forward to seeing a detailed restructuring plan: can Lufthansa achieve the impossible after all, and turn around an airline that has struggled for 75 long years?”