4 months ago
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Lufthansa wants the move to strengthen its position in Europe's fast-growing aviation market. It has assured the EU that the takeover will not have adverse effects on fair competition on long-haul routes.
Lufthansa says it is close to getting the go ahead from the European Union (EU) for its takeover of the Italian national carrier ITA Airways, with the EU competition authority about to sign off on it.
Lufthansa's shares fell 5.57% on Thursday evening, trading at €5.93.
The deal is likely to be worth about €325 million for now and will allow Italy to dispose of ITA Airways, which has been a loss-making asset for a while now, therefore going some way towards plugging national finances. The deal needs to be finalised by 4 July, although the details may still change by then.
Lufthansa is likely to execute the takeover in a few steps, the first one being acquiring about a 41% stake of ITA Airways, which will be worth about €325 million. Later on, Lufthansa will also have the option of taking over another 49% of ITA Airways, should it wish to. The final 10% could potentially be on the table at a future date, although how much these additional stakes could be worth has not yet been revealed.
Back on 25 May this year, when Lufthansa had agreed to take over 41% of ITA Airways, Carsten Spohr, the chief executive officer (CEO) of Deutsche Lufthansa AG said: "Today’s agreement will lead to a win-win situation for Italy, ITA Airways and Lufthansa Group.
"And it is good news for Italian consumers and for Europe, because a stronger ITA will invigorate competition in the Italian market. As a young company with a modern fleet, and with its efficient and expanding hub in Rome, ITA is a perfect fit for Lufthansa Group. In Milan, ITA serves a strong catchment area which also offers potential for growth.
"As part of the Lufthansa Group family, ITA can develop into a sustainable and profitable airline, connecting Italy with Europe and the world. At the same time, this investment will enable us to continue our growth in one of our most important markets."
Why does Lufthansa want to take over ITA Airways?
Although currently considered a loss-making asset, taking over ITA Airways could give Lufthansa an enviably strong position in the European aviation market, as well as a more robust hold on the transatlantic market.
Lufthansa already has a strong track record of being able to revive struggling businesses and subsidiaries. In this case, ITA Airways will be joining the likes of other Lufthansa-owned airlines such as Swiss International Airlines (SWISS), Austrian Airlines, Brussels Airlines and many more. Similarly, Italy itself is a booming market for air travel, with EasyJet, Ryanair and other budget airlines seeing a lot of demand. Lufthansa also directs a lot of air traffic to its subsidiary airlines through its key cities of Munich and Frankfurt.
In view of Lufthansa's extensive position on the continent, the ITA Airways deal has attracted scrutiny from EU authorities, with Lufthansa having to reiterate it would continue competing fairly on its long-haul routes and not raise prices excessively for travellers.
