Lufthansa receives EU approval to buy 41% of ITA Airways

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2 years ago

Germany’s Lufthansa won EU antitrust approval to buy 41% of Italy’s ITA Airways for 325 million euros ($350 million) on Wednesday after ceding routes and slots.

The deal will boost Lufthansa’s presence in the lucrative southern European market and is one of three high-profile sector transactions in Europe, underscoring efforts by its airlines to boost scale to offset rising operating costs.

ITA also offers key long-haul routes to Lufthansa, which has an option to take full ownership if the Italian airline’s financial performance improves.

Lufthansa and ITA agreed to cede Italian short-haul routes to one or two rivals, the European Commission said. The German airline has said it is in talks with Easyjet and Spanish low-cost carrier Volotea.

→ ITA Airways to fly between Rome and Bangkok in the winter season

The combined group will also undertake interlining agreements or slot swaps for long-haul routes to increase frequencies and improve connections for one-stop flights, it added.

“The package of remedies proposed by Lufthansa and the MEF (Italy’s ministry of economy) on this cross-border deal fully addresses our competition concerns by ensuring that a sufficient level of competitive pressure remains on all relevant routes,” EU antitrust chief Margrethe Vestager said in a statement.

Lufthansa can only close the deal once rivals, approved by the EU antitrust watchdog, start operating the routes.

Analysts say it will not be easy to turn around ITA, whose predecessor Alitalia faced decades of financial struggles and bailouts. Lufthansa will likely need to make a significant investment to rebuild ITA.

Regulators in Europe also worry the region’s three largest airline groups – IAG, Air France KLM (AIRF.PA), opens new tab and Lufthansa – are becoming too dominant, potentially hurting consumer choice and making flying less affordable, Reuters reported.