Lufthansa and the Italian government have reached an agreement for the German airline group to purchase an initial 40% stake in ITA Airways.
According to a report by the Italian daily Corriere della Sera, the agreement will be made official on May 25, 2023. The 40% stake could grow to a later investment of at least 90%, with the German airline group putting forward between €320 million ($345.2 million) and €330 million ($356 million).
If ITA Airways reaches a break-even point in H1 2026, Lufthansa could begin the process to purchase the remaining shares of the Italian carrier for about €500 million ($539.3 million).
However, the deal would have to be approved by the European Commission (EC), which, according to Corriere Della Sera’s sources, is already aware of the potential deal and will wait for remedial measures to address competition concerns.
On May 17, 2023, the EC denied a merger between Korean Air and Asiana Airlines, citing competition concerns on routes between Europe and South Korea.
The Italian government had looked to finalize the deal under which Lufthansa would purchase ITA Airways by mid-April 2023. However, negotiations dragged on, resulting in a month-long delay.
Lufthansa Group officially announced that it has put forth a bid for ITA Airways in January 2023.
“For Lufthansa Group, Italy is the most important market outside of its home markets and the US,” the German airline group said in an announcement at the time.
Lufthansa was the only bidder left for ITA Airways after a consortium comprised of Delta Air Lines, Air France-KLM, and the investment firm Certares backed out of the race to acquire the Italian airline. Meanwhile, the Mediterranean Shipping Company (MSC), which was working with Lufthansa, also backed away from the deal.
ITA Airways was established out of the ashes of Alitalia, another Italian state-owned airline. It commenced operations on October 15, 2021, the same day that Alitalia ceased flying. The EC allowed the Italian government to inject up to €1.3 billion ($1.4 billion) of cash into ITA Airways, €1.1 billion ($1.18 billion) of which has already been used up, while also ruling that the new airline would not be the economic successor of Alitalia.
As such, Alitalia’s debts were not carried over to the new airline, with the Italian government also having to recover €400 million ($431 million) plus interest of state aid from the now-defunct airline following the sale of its assets.