Europe Is Reportedly Not Willing To Approve The ITA-Lufthansa Purchase


Summary

  • Lufthansa’s proposed acquisition of ITA Airways is unlikely to be approved by the European Commission due to insufficient remedies offered by Lufthansa.
  • Lufthansa had agreed to purchase a 41% stake in ITA Airways for €325 million ($348 million) and had the option to acquire the rest later.
  • The merger of the two airlines would create monopolies on several routes, and Lufthansa offered remedies including returning slots at Milan Linate International Airport, but the EU Commission is reportedly unsatisfied.


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Over the past year, Lufthansa has been in talks to acquire a large stake in ITA Airways. However, the European Commission has reportedly decided that the agreed-upon package offered by Lufthansa would be insufficient to get approval, as reported by Italian outlet Corriere.

Lufthansa originally put its request to the European Commission on January 8, which would allow the airline to acquire a minority stake in ITA Airways. Per Reuters, the European regulators have yet to reach out to either rivals or customers of Lufthansa, which many experts believe will result in the European Commission being unwilling to approve this proposed acquisition.


Original acquisition

In May 2023, Lufthansa agreed to purchase a 41% stake in ITA Airways. The German flag carrier originally agreed to a deal with the Italian Government worth €325 million ($348 million). It also retained the option to purchase the rest of the airline at a later date. Within the deal, the Italian Ministry of Economy and Finance also committed to a capital increase of €250 million ($268 million).

An ITA Airways Airbus A330neo on an airport apron.

Photo: SimoneAmi | Shutterstock

Lufthansa has been interested in investing in ITA Airways for several years. The airline partnered with MSC Group, the parent company of the Mediterranean Shipping Company, in a bid to become more appealing than the other interested parties, IndiGo Partners and Air France-KLM. Italy originally chose Air France-KLM as its preferred option, but Lufthansa rejoined the conversation after Italy’s talks with Air France-KLM didn’t lead anywhere. The Chief Executive Officer of the Lufthansa Group, Carsten Spohr, spoke about the possible acquisition, saying,

“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.”

Just a month after the initial agreement, on June 16, 2023, an Italian court approved the ITA Airways purchase. However, several key hurdles remained. Watchdog authorities have analyzed the merger to determine if antitrust regulations will be violated. After approval from Italian and German regulators, the European Commission has to authorize the purchase with final approval. The regulators must determine that the acquisition will not cause significant issues to the competitive landscape that exists in the European aviation industry.

Resulting monopolies and remedies

The union of the two airlines would create six monopolies on routes stemming from Milan and Rome. Milan to Frankfurt, Düsseldorf, and Stuttgart, as well as routes between Rome and Frankfurt, Munich, and Zurich, would be monopolized, as they are routinely flown by the two airlines. Other dominant routes include Milan to Brussels, Rome to Brussels, and Milan to Hamburg.

Lufthansa Airbus A350-900 departing Munich Airport MUC

Photo: Lukas Wunderlich | Shutterstock

To receive approval for the acquisition, Lufthansa outlined several remedies each airline would give to keep the European aviation industry competitive. Per Reuters, Lufthansa was prepared to return several slots at Milan Linate International Airport (LIN) due to the overlap of several routes between the two airlines. Lufthansa also does not intend to alter any transatlantic routes.

However, per a report by Corriere, the EU Commission is supposedly not satisfied with the remedies offered by Lufthansa, meaning they are not likely to allow the acquisition in its current state. Because the EU regulators are not consulting other carriers at this point in time, the regulators have most likely made their decision regarding the proposed acquisition and remedies.



This article was originally published by a simpleflying.com . Read the Original article here. .