European Commission OKs Lufthansa-ITA Airways Merger

European Commission OKs Lufthansa-ITA Airways Merger
European Commission OKs Lufthansa-ITA Airways Merger

Lufthansa will acquire a 41% stake in ITA Airways from shareholder MEF through a capital increase of 325 million euros, in a second phase rise it to 100% by 2033, for a total investment of 829 million euros.

Europe has given the green light for the proposed merger between ITA Airways and Lufthansa. The confirmation came from the Italian Minister of Economy and Finance (MEF), Giancarlo Giorgetti, at the press conference held alongside ITA Airways President, Antonino Turicchi, and Lufthansa CEO, Carsten Spohr.

“Today we close the historic, long-standing affair,” said Giorgetti.

“It was a troubled and difficult path but it is a great Italian, German and European success,” he added. “The management of the company will be up to the shareholders, with management control for compliance with the objectives from which the Italian State is excluded.”

More than a year after the preliminary agreement between the ministry and Lufthansa for the sale of a minority share of ITA Airways to the German group, the approval of the merger by the national authorities of the 27 EU member countries arrived on July 3, just a day short of the deadline set for July 4.

“Logic prevailed over the various obstacles”, said the president of ITA Airways, Turicchi, in the press conference. “I qualify this operation as an operation guided by logic. Europe is strengthened with this operation.”

Lufthansa will acquire a 41% stake in ITA Airways from shareholder MEF through a capital increase of 325 million euros, in a second phase rise it to 100% by 2033, for a total investment of 829 million euros. Lufthansa will de facto be at the helm of ITA, despite having less than half of the shares immediately after signing.

The Germans will nominate the CEO of ITA (Joerg Eberhart) and two of the 5 directors on the next Board of Directors.

Lufthansa will appoint the future CEO of ITA Airways, as stated by Carsten Spohr during a conference call following the agreement for the entry into the capital of the Italian company. Additionally, Lufthansa will also appoint a director to the board, which is composed of five members. The closing for the purchase of 41% of ITA Airways is expected by the end of the year, and Spohr expressed confidence in transforming ITA into a profitable airline by 2025. He emphasized that ITA has been completely restructured and configured to be a cost-competitive airline, with no relationship or issues related to the old Alitalia. Lufthansa’s plans include developing Rome Fiumicino as a profitable hub and consolidating Linate, with a focus on long-haul flights to North and South America, Africa, and some Asian markets.

Additionally, Lufthansa’s payment of 325 million euros for the acquisition of 41% of ITA Airways will not be directed to the MEF, but rather allocated for the company’s revitalization. “We are not obligated to acquire the entire company until all goals have been met,” Spohr emphasized.

The European Commission has reported that Lufthansa and MEF have proposed a set of solutions after 7 months of negotiations to address the EU Antitrust concerns. These solutions include commitments to open up short-haul routes to one or two rival airlines, allowing them to operate direct flights between Rome or Milan and certain airports in central Europe. Additionally, the remedies will require the beneficiaries to operate on these routes for a specified period. Furthermore, Lufthansa and MEF will ensure that one of the rival airlines will have access to ITA’s national network to provide indirect connections between certain central European airports and certain Italian cities other than Rome and Milan.

The merged company will engage in agreements with competitors to enhance their competitiveness on the long-distance routes in question, such as through interline agreements or slot exchanges. This will result in increased frequencies of nonstop flights and/or improved connections for flights with layovers on each of the routes. The Commission’s evaluation took into account the fact that MEF will maintain a majority stake in ITA following the transaction, which will provide ITA with motivations to compete against Lufthansa’s partners in North America until ITA becomes part of the joint venture.

Lufthansa and MEF have agreed to transfer the take-off and landing slots at Linate airport to the beneficiaries of the remedies for short-haul routes. The number of slots to be divested is more than what is required for operating short-haul routes, as well as the number of slots that would have been added to ITA’s portfolio through the transaction. This transfer will enable the acquirer to establish a sustainable presence at Linate Airport and potentially offer its own seamless connections between Italy and Central Europe.

According to the commitments, Lufthansa and MEF are only allowed to proceed with the transaction once the Commission approves suitable remedy adopters for each of the short-haul, long-haul, and Milan Linate commitments. The Commission will evaluate the appropriateness of the remedy adopters as part of a separate purchaser approval process. These commitments were deemed acceptable by the Commission. The decision is contingent upon full adherence to the commitments. An independent trustee will oversee their implementation under the Commission’s supervision.

The alliance between ITA and Lufthansa has the potential to propel the Italian air transport industry into a new era, enabling it to compete effectively in the global market, the Italian Transport Federation (FIT-CISL) Secretary General Salvatore Pellecchia said, adding that he is confident that the new Industrial Plan will support investments for acquiring new aircraft, expanding the commercial offerings, and consequently, increasing employment levels by hiring personnel currently on layoffs. This includes over 2,200 resources such as ground personnel, staff, maintenance, pilots, and flight attendants.

Pellecchia also emphasized the need for immediate discussions with the Ministry of Infrastructure and Transport to address strategic aspects related to the company’s future, as well as for Lufthansa to address long-standing management issues within the company.

The mention is made of the ‘Fit for 55’ (FF55) package and the subsequent Sustainable Aviation Fuels (SAF) within the ReFuelEU Aviation project. This initiative mandates the blending of SAF into fuels starting from 2025 for all flights departing from European Union airports. This requirement applies to airlines that do not have similar obligations, resulting in an additional cost of approximately 15 euros for the same type of traffic.

“It is crucial for policymakers to take necessary actions to prevent any adverse effects on European airlines and passengers. This is essential to maintain a fair competition and a level playing field among carriers. Without these vital and immediate interventions, there is a significant risk that the entire Italy-Lufthansa operation could face failure. As competition in the aviation industry is global, it is imperative that the regulations are also implemented on a global scale,” stated the FIT-CISL Secretary General.

The inaugural ceremony for the first ITA Airways Airbus A330-900 was also held at the Airbus Delivery Center in Toulouse.

“Today marks a significant milestone in our strategic partnership with Airbus. I am delighted to be present here at the esteemed headquarters in Toulouse for the delivery of the first Airbus A330neo, featuring the innovative ITA Airways cabin design,” stated Francesco Presicce, the chief technology officer of ITA Airways.

“By selecting Airbus as our exclusive fleet provider, we have cultivated a unique collaboration that spans various areas of business development, aiming to achieve a more modern, comfortable, and environmentally friendly air travel experience through cutting-edge technologies,” Presicce added.

ITA Airways’ latest Airbus aircraft is dedicated to Gelindo Bordin, the renowned Italian marathon runner and Olympic champion, aligning with the company’s tradition of honoring Italian sports legends with the distinctive Blue Savoia livery.

The finally, the lingering questions regarding the airlines “marriage” about the potential appeal to the EU Court of Justice, which is feared by certain competing carriers, including Wizz Air, have not been evaded, with Minister Giorgetti stating: “If there are opposing positions to this transaction, it is best to declare them immediately and reach out to the EU. The decision made thus far by the EU demonstrates their understanding of the agreement’s value in favor of airline users.”

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Mario Masciullo - Special to eTN

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