European Commission gives final approval to Lufthansa-ITA takeover

The European Commission has ruled that the Lufthansa Group can enter the capital of its Italian sector partner, ITA Airways, the successor to Alitalia. However, to safeguard competition, the two companies must offer other airlines access to several routes.

“Today we are concluding a historic, long-standing case,” the Italian Economy Minister Giancarlo Giorgetti commented on the news. “This is a success for this government – an Italian, European, and German success, even though negotiations were tough.”

Some concessions

German airline Lufthansa and the Italian government agreed on a German stake in ITA in May last year. Lufthansa would invest 325 million euros for a 41% stake and could, in the medium term, take over the loss-making Italian airline entirely—by 2033—for a total investment of 829 million euros.

However, the Commission had concerns about the deal’s impact on competition on air routes from Italy to central Europe, North America, Japan, and India. Their dominant position at Milan Linate airport also posed problems. The Commission opened an in-depth investigation in January. That has now been completed. The light goes green, but Lufthansa and the Italian state must make some concessions.

For example, Lufthansa and the Italian state must allow one or two competitors to operate flights between Rome or Milan and airports in Central Europe. They must also negotiate with other companies to improve competition on routes to the United States and Canada. Finally, they must also cede slots at Milan Linate Airport.

“Safeguard competition”

“At a time when consumers are facing ever-higher prices for air travel, it is essential to safeguard competition in the sector,” Euro Competition Commissioner Margrethe Vestager commented. “We had to avoid that passengers would end up paying more or getting fewer and lower-quality air services on certain routes to and from Italy.”

The Commission’s investigation caused tensions with Prime Minister Georgia Meloni’s radical right-wing government. Deputy Prime Minister Matteo Salvini said, among other things, that a European veto would amount to “a hostile act against Italy.” After Alitalia’s crash, Rome launched ITA in 2021 with 1,35 billion euros of taxpayers’ money, but the airline intended to be able to continue on its own eventually.

Lack of clarity

Lufthansa, Europe’s largest airline group, emerges as a solid shareholder. The acquisition will allow the German group to firmly expand its access to the Italian market, the third largest in the EU.

The Italian State will inject 250 million euros for its part to strengthen ITA’s capital, according to the terms of the agreement. “Today, we are closing a historic and long-standing story. We can tell Italians that we will no longer spend a single euro of their taxes,” said Italian Economy and Finance Minister Giancarlo Giorgetti. “ITA was created precisely to end the state aid granted to Alitalia in the past, which cost the Italians money from their taxes.”

However, the approval announcement does not convince the European Consumer Organization (BEUC). “The lack of clarity on these corrective measures,” which are indeed not detailed, “makes us fear that consumers will pay a high price for this merger, with higher fares, reduced choice of routes, and deteriorated service,” said the general director Agustin Reyna.