EU Commission blocks deal between Lufthansa and ITA

The European Commission has blocked plans by German airline group Lufthansa to take a minority stake in Italian airline ITA Airways. EU anti-trust regulators are “concerned after a preliminary investigation that the transaction could restrict competition on several short- and long-haul routes to and from Italy,” they said in a press release. This mainly concerns flights between Italy and Central Europe, the United States, Canada, Japan, and India.

“By opening an in-depth investigation, we want to analyze the transaction further,” said European Competition Commissioner Margrethe Vestager. That analysis is necessary to “ensure that the acquisition of ITA does not reduce competition on short- and long-haul flights and does not lead to higher prices, less capacity, or lower quality of passenger flights to and from Italy”.

Limited competition

The Commission said there is limited competition from other airlines, primarily low-cost airlines, such as Ryanair, on non-stop routes to and from some Central European destinations. However, these would often fly from more remote airports. It also noted that on some of these routes, Lufthansa and ITA would compete directly with non-stop flights.

Furthermore, the European Commission, which has until June 6 to decide whether to block or approve the deal with or without conditions, is also concerned about ITA Airways being too dominant at Milan-Linate airport.

Pressure from the Italian government

Lufthansa announced a deal in May to inject 325 million euros into ITA Airways over the 2023-2024 period in exchange for a 41% stake. Eventually, the Germans could fully acquire the Italian airline, the successor to Alitalia. If the deal can go through, ITA will become a sister airline to Austrian, Brussels, and Swiss Airlines in the Lufthansa group.

Brussels had given the new company the go-ahead and authorized new public financing of 1,3 billion euros, with the condition that ITA would eventually become independent.

Third largest market in EU

The German airline group, which says it has the highest sales in Europe, is sticking to its plans. Lufthansa responded that it will make a solid commitment to complete the study quickly and implement the investment afterward. It still assumes the transaction will be approved. The takeover should allow the German giant to expand its access to the Italian market, the third largest in the EU.

According to the press agency DPA, Italy’s Prime Minister Giorgia Meloni has pressured the EU to agree to the deal quickly. Finance Minister Giancarlo Giorgetti has critiqued the lengthy review, decrying “the fact that we are losing more time”.

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