German airline Lufthansa has signed an agreement for a minority stake in struggling Italian ITA Airways

Milan — The German airline Lufthansa signed an agreement with the Italian government on Thursday for a 41 percent minority stake in the long-struggling ITA Airways, formerly Alitalia.

The deal requires a capital raising investment of 575 million euros, 325 million euros from Lufthansa and the rest from the Italian Ministry of Finance, which will provide capital for the growth. Lufthansa will also have the option to purchase the remaining shares at a later date.

Lufthansa’s industrial plan for the Italian airline calls for revenue of 2.5 billion euros ($2.68 billion) this year, rising to 4.1 billion euros by 2027, the Italian finance ministry said in a statement. During this period, Lufthansa plans to expand its ITA fleet from 71 to 94 aircraft and increase its workforce from the current 4,000 to 5,500 employees.

After closing the deal, ITA Airways will become the fifth airline of the Lufthansa group.

According to the strategy, Rome’s Fiumicino Airport will become one of the Lufthansa Group’s hubs, as ITA Airways focuses on long-haul flights. Lufthansa CEO Carsten Spohr also said there was potential for growth in Milan, Italy’s business and financial center.

The deal must be approved by EU competition authorities.

ITA Airways and Alitalia’s predecessor have been looking for an industry partner for a long time, as the Italian airline has been lagging behind low-cost airlines on domestic and European routes. Over the past 15 years, a number of deals with potential and real partners have failed.

ITA was officially launched in October 2021 after bankrupt flagship Alitalia landed its last flight, ending a 74-year run marked by financial uncertainty and a slide into bankruptcy in later years.

Lufthansa was the only airline to submit a bid in the latest tender earlier this year. The German airline has named Italy as its third most important market after Germany and the United States due to its business relationships and strong export economy, as well as its tourist attraction.

The German airline already operates Air Dolomiti in northern Italy, directing long-haul traffic from Milan, Verona and Venice to connections to Munich and Frankfurt.