Lufthansa agrees to pay €325m to acquire 41% of Italian flag carrier

Lufthansa is taking over a 41 percent stake in the Italian ITA Airways, the successor company of Alitalia, the already insolvent flag carrier.

The German group said it will pay 325 million euros for the stake, and the Italian economy ministry will commit another 250 million euros to the Italian airline.

Lufthansa will integrate ITA with other carriers in the wider group, including Eurowings, Swiss, Brussels Airlines and Austrian Airlines, as well as the central German flag carrier. “As a network airline, ITA works closely with the Lufthansa Group to take advantage of the group’s synergies,” the airline said.

According to a joint statement by Lufthansa and the Italian Ministry of Economy, ITA will hire an additional 1,200 employees this year, bringing the total number to 5,500.

The German company appoints the CEO of ITA as well as one of the five board members of the Italian company. Lufthansa has an option to acquire a majority stake in the future, based on a negotiated price.

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The deal ends the Italian government’s nearly three-year search for a private buyer for the Italian flag carrier.

Initially, bidders such as Delta Air Lines, Air France-KLM and the Swiss-Italian container shipping and cruise line MSC took part in the process.

Thursday’s deal is Lufthansa’s second attempt to take over the ailing Italian airline. In early 2022, it submitted a joint bid with MSC for a controlling stake in ITA Airways, which was overtaken by an offer from US private equity group Certares at the end of August.

Former Prime Minister Mario Draghi’s government said at the time that a private-equity-led bid better suited the Italian airline’s needs. Certares offered to buy a controlling stake in the airline and entered into commercial partnerships with Delta Air Lines and Air France-KLM.

The negotiations were interrupted by Italy’s new right-wing government after the general elections in October. According to several Italian officials, the new government wanted the carrier to be taken over by a larger competitor rather than a private equity group.

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The creation of a hub in Rome will allow Lufthansa to take advantage of the lucrative transatlantic market and optimize schedules on European routes to increase yields.

Stephen Furlong, an airline analyst at Dublin-based stockbrokers Davy, said Lufthansa’s move was a “helpful development” in the ongoing consolidation of the European airline industry.

Lufthansa CEO Carsten Spohr said earlier this month that “geography” was the reason for acquiring the stake in ITA.

He said it was an “obvious disadvantage” for the group that its headquarters – in Brussels, Frankfurt, Munich, Vienna and Zurich – were all “quite north”.

“I think we are missing a southern hub compared to our European competitors, especially because of the increase in traffic from Africa and Latin America,” he said.

A Rome hub would offer the group more new flight capacity, he added, pointing out that the group’s Frankfurt hub has reached full capacity.