Lufthansa will pay €325mn for a 41% stake in Italy’s flag carrier

Lufthansa will take a 41% stake in ITA Airways (formerly Alitalia), the successor to the country’s flag carrier, which is now bankrupt.

The German group announced that it would pay €325mn to acquire the stake, and the Italian economics ministry will invest an additional €250mn in the Italian carrier.

Lufthansa integrates ITA into the broader group of carriers, including Eurowings and Swiss Airlines. It will also be integrated with the German flag carrier. As a network carrier, ITA will work closely with Lufthansa Group in order to take advantage of group synergies.

In a joint statement, Lufthansa said that the Italian economics ministry and Lufthansa had agreed to hire 1,200 more employees in this year. This would bring ITA’s total staff number up to 5,500.

The German company will appoint ITA’s CEO as well as one member of its five-member board. Lufthansa has the option to buy a majority share in the Italian company at a future date based on an agreed price.

The Italian government spent nearly three years looking for a private buyer of the Italian flag carrier.

The process began with bidders like Delta Air Lines and Air France-KLM, as well as the Swiss-Italian container shipper and cruise company MSC.

The agreement signed on Thursday marks Lufthansa’s second attempt at taking over the Italian airline. It submitted a joint bid with MSC in early 2022 for a controlling share in ITA Airways. This was surpassed in late August, by a bid made by the US-based private equity firm Certares.

The former government of Mario Draghi said that the private equity offer was better for the Italian airline at the time. Certares offered to purchase the airline’s majority stake, and had formed a partnership with Delta Air Lines, Air France-KLM and Air France.

After the general elections in October, Italy’s right-wing government stopped all talks. Italian officials have stated that the new government preferred a competitor to take over the airline instead of a private equity firm.

By establishing a hub in Rome, Lufthansa will be able to tap into the lucrative transatlantic markets and optimize flight schedules for European routes. This will boost their yields.

Stephen Furlong said that the move by Lufthansa was “helpful” for the continued consolidation of Europe’s aviation industry.

Carsten Spohr, the chief executive of Lufthansa, said earlier this month that “geography” played a part in his decision to seek a stake with ITA.

He said that it was “obviously an disadvantage” for the group to have its hubs in Brussels, Frankfurt and Munich, as well as Vienna and Zurich, all of which were “fairly located north”.

He said: “I believe we lack a southern hub in comparison to our European competitors. This is especially true for the increasing traffic into and out of Africa, Latin America and Asia.”

He added that a hub in Rome could also provide the group with more capacity, as the main hub of the group, Frankfurt, had reached its maximum capacity.

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