Air transport

The Ita-Lufthansa case holds sway in Dubai at the Iata Assembly

The sale of 41% to the Germans under the EU lens. Companies' global profits expected to rise

by Gianni Dragoni, Dubai correspondent

2 June 2024

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The Ita-Lufthansa case is also holding court in Dubai. At the assembly of Iata, the world airline association with 320 members, which began today in the Arab Emirates' largest economic centre, attention is focused on the operation that could redraw the map of air transport in Europe. For more than a year, the agreement between Mef and the powerful German carrier has been waiting for the green light from the European Antitrust Authority, which has been delayed. A decision is expected by 4 July.

Lufthansa and MEF proposals in Brussels

Over the past few days Lufthansa and the Mef have presented in Brussels their answers to the latest objections of the Directorate General for Competition, including the relinquishment of 15-17 slot pairs at Linate and ten slot pairs at Fiumicino. This should allow new competing carriers (including Volotea and easyJet) to open routes from Italy's two main cities and central Europe: Germany, Austria, Switzerland, Belgium. Now it is up to the Commission's offices to assess whether the remedies offered are sufficient to give the go-ahead to Lufthansa's entry with 41% in Ita's capital, the first step towards a gradual acquisition of the majority shareholding, with an option up to 100% within ten years.

Vestager fears price increases

EU Competition Commissioner Margrethe Vestager said she is concerned about the effect the Ita-Lufthansa merger would have, with the risk of higher ticket prices. In fact ticket prices have already risen last year, at least +20% on average.

Tickets have already increased

But international flights from Italy have spiked by more than 100%, and no measures against the high cost of flights have come from Brussels. The Consumers' Union has calculated, based on ISTAT data on prices in May, that compared to the pre-crisis period, the cost of international flights has risen the most, with an increase of 132.3 per cent compared to mid-2021. In the same time frame, domestic flights rose by 55.1 per cent.

Spohr and Turicchi

The top executives of all the world's airlines are in Dubai, including Carsten Spohr CEO of Lufthansa and Antonino Turicchi, the manager put in charge of Ita Airways by Giorgia Meloni in November 2022. The Ita-Lufthansa deal, if it goes through, will also have an impact on the other major European groups.

The impact on Air France-Klm

Starting with Air France-Klm, which still has a commercial alliance with the company born out of Alitalia's latest dissolution. An increasingly tenuous alliance, but still standing, although Ita is kept on the sidelines, according to some inside sources. Ita is still part of SkyTeam, the global alliance between the Franco-Dutch group and American Delta. If the agreement with Lufthansa closes, Ita will leave SkyTeam and join the Star Alliance forged by the German carrier.

Full Traffic

The Iata assembly comes at a very positive time for commercial air transport. Traffic is booming. Total demand, measured in passengers per km (Rpk), rose 11% in April compared to the same month last year. The total capacity on offer, in seats per km, was 9.6% higher than in April 2023. As a result, the aircraft seat occupancy rate (load factor) in April was 82.4%, one percentage point higher than the previous year. International demand grew the most, +15.8 per cent compared to April 2023, with capacity up 14.8 per cent. Domestic demand increased by 4 per cent compared to April 2023, with capacity up 2.1 per cent.

Walsh: growth for 36 consecutive months

"Passenger demand has been growing for 36 consecutive months. As we enter the peak summer travel season in the northern hemisphere, there is every reason to be optimistic for a strong summer, with airlines offering a wide range of traffic options," commented Willie Walsh, Iata's Director General. Asia Pacific is the area where demand grew the most (+17.4%), followed by Africa (+15.7%) and the Middle East (+14.1%). In Europe there was growth of 9.3%, in Latin America of 8%, and in North America of 4.2%.

Growing profits

The Carriers Association will announce its updated forecasts for the aggregate results of global airlines tomorrow. Most analysts expect the results to improve from the figures announced on 6 December. At that time an estimated worldwide net profit of USD 23.3 billion for 2023 and USD 25.7 billion for this year was announced. Total revenues were expected to be 896 billion in 2023, +6.9% over 2022, an all-time record (at current values, without adjusting for inflation), compared to the record of 838 billion in 2019. The outlook is 'positive', for 2024 Iata predicted a further improvement in the balance sheets: 25.7 billion in aggregate net profits and 964 billion in total revenue. The record year for net profits remains 2017, with 37.6 billion, but by now the deep wounds inflicted by the pandemic have healed.