Air transport

EU green light for Ita and Lufthansa wedding. Giorgetti: same logic on Mps, we are not desperate

Vestager: competition preserved. Giorgetti: very successful operation

by Redaction Rome

3 July 2024

Via libera dalla Commissione europea al matrimonio tra Lufthansa e Ita Airways

4' min read

Key points

Giorgetti: very successful operation
Giorgetti on Mps same logic Ita, we are not desperate
Vestager: competition preserved
Conditions for the go-ahead
Slot sale at Linate
Short-haul routes
North American links
Fazzolari: 'Great satisfaction, agreement protects national interest'

4' min read

The European Commission has approved the merger between Ita and Lufthansa . The go-ahead for the deal includes conditions to protect competition at the Milan-Linate airport, on short-haul routes between Italy and central Europe, and on long-haul connections between Fiumicino and North America, with an opening to rival airlines. The German skies giant will acquire from the shareholder Mef a 41% stake in Ita through a capital increase of 325 million euros, to then rise in a second phase - by 2033 - to 100% of the newco risen from the ashes of Alitalia for a total investment of 829 million.

Giorgetti: highly successful operation

Satisfied was Economy Minister Giancarlo Giorgetti: 'Today we are closing a historic and annoying affair, that of the national carrier and then Ita, this is a success for this government, an Italian, European and German success, even compared to a very tough negotiation,' he said at a press conference at the Mef. "The positive solution comes with an operator like Lufthansa, which comforts us and allows us to develop air traffic to and from Italy, to develop the Italian economy, Rome will become the reference hub for America and Africa," the minister stressed.

Giorgetti on Mps same logic Ita, we are not desperate

'On Mps,' Giorgetti said, 'there is the same logic used for Ita, we want to do an industrial operation but under the right conditions for the state and the economy, the operation will be done when these conditions are met, we are not desperate'.

Vestager: competition preserved

"We evaluated the operation very carefully," said European Commission Vice-President Margrethe Vestager. "It was necessary to avoid that passengers would end up paying more or end up with lower quality and lesser air transport services on certain routes in and out of Italy. The remedy package proposed by Lufthansa and Mef fully addresses our competition concerns by ensuring that a sufficient level of competitive pressure remains on all relevant routes."

The conditions for the go-ahead

The approval of the transaction, the European Commission points out in a note, 'is conditional on full compliance with the remedies offered by Lufthansa and the Mef'. Moreover, underlines the EU antitrust, 'although Ita is performing well today, its long-term viability as an independent carrier would have remained highly uncertain in the absence' of the takeover by the company led by Carsten Spohr. The deal - approved under the EU merger regulation - envisages sacrifices by the two companies to address antitrust concerns on three fronts considered critical: too large a market share at Milan-Linate, a monopoly situation on some short-haul routes between Italy and Germany, Austria, Switzerland and Belgium, and reduced competition on long routes between Fiumicino and North America. All threats, in the EU's view, to the quality of services offered to citizens and above all to price stability, which would risk becoming unsustainable.

Slot disposal at Linate

At the Lombard hub, the parties will cede 15-17 pairs of slots (equal to 30-34 daily round-trip flights) - a significantly higher number than the 11 pairs owned by Lufthansa - guaranteeing that at least one other carrier can not only take over from the German company but also establish itself in a more structured manner at the airport, also operating new flights. The business plan of the airline that will animate the slots ceded by the Italo-German pair - in pole there is easyJet - must in any case be 'solid' and pass the EU examination in the coming months.

Short-haul routes

On problematic short-haul routes from Italy to central Europe, it is envisaged that at least one or two rivals may take over by operating non-stop flights for a minimum period of three years, while also ensuring that one of these carriers has access to Ita's national network in order to offer indirect connections between certain central European airports and Italian cities other than Rome and Milan.

North American connections

Even on the long flights from Fiumicino to North America - Chicago, Washington, San Francisco and Toronto -, at the centre of a tug-of-war that was resolved in extremis, the pact foresees the entry of an Ita-Lufthansa competitor capable of offering direct flights or, alternatively, two of the carriers already present - such as rivals Air France, Iberia, British Airlines, Klm or Tap - which will be able to operate connections with a stopover in their European hubs, guaranteeing, however, competitive prices and that the journey does not have a total duration of more than three hours compared to direct crossings. Strengthened by the green light from Brussels - and the influence of the transoceanic joint venture that Lufthansa forms with its North American sisters United and Canada Airlines and which will see Ita make its entry - Rome and Frankfurt will have until November to sign agreements with competing companies.

"The merged company will enter into agreements with competitors to improve their competitiveness on the long-haul routes concerned, for example through interlining agreements or slot exchanges," the EU executive points out, stressing that "this will lead to an increase in the frequency of direct flights and improved connections for flights with a stopover on each route". In its assessment, the EU antitrust team led by Margrethe Vestager took into account that Mef will retain a controlling stake in Ita after the transaction and will continue to have incentives for Ita to compete against Lufthansa's joint venture partners in North America, at least until Ita is integrated into the joint venture.

Fazzolari: 'Great satisfaction, agreement protects national interest'

"There is great satisfaction for the resolution of a dossier that had been dragging on for decades. The agreement between Ita Airways and Lufthansa is extremely positive, because it combines the industrial and employment protection of the Italian company with the defence of the national interest, guaranteed by the presence of the Italian State with a share for the period of implementation of the plan. Thanks to the fruitful work of all the actors involved, and in particular of the current governance of Ita Airways, Italy will henceforth have a company with accounts in order and a solid growth perspective. Moreover, Italian taxpayers will finally stop paying for inefficiencies of past management out of their own pockets'. Thus Giovanbattista Fazzolari, Undersecretary for the Implementation of the Government Programme.