Lufthansa joins airline ITA

Airbus 350 from ITA

Lufthansa is joining Alitalia’s successor airline. Complete takeover is planned for a later date.

(Photo: Bloomberg)

Frankfurt Lufthansa has reached an agreement with the Italian government on the purchase of a minority stake in the state airline ITA Airways. This was announced by Lufthansa and the Ministry of Finance in Rome on Thursday.

Details on the amount of the share were not given. According to a report by the Reuters news agency, Lufthansa will initially buy 40 percent of ITA from the Italian state for 320 to 330 million euros.

The talks between the Ministry of Finance and Lufthansa had dragged on much longer than either side had expected. The government in Rome initially granted the company exclusive talks until April 24. However, the deadline had to be extended because there were still open questions. The next date, May 12, was also canceled.

One reason for this: the competition authorities in Brussels sent signals to Rome that the EU Commission will go into what is known as phase 2, a longer and more in-depth examination of the deal. This messes up the original plans. During this examination, a company may not start with the integration of the new acquisition. But this is important so that ITA can get out of the red.

Time is running out. Not only the EU Commission is demanding a sustainable solution for ITA after the government in Rome has invested many billions of euros in Alitalia and also in ITA as start-up aid. The airline itself also needs security quickly. Last year the company posted a net loss of 486 million euros on sales of 1.6 billion euros.

CEO Spohr wants to strengthen business in the southern hemisphere

Spohr wants to use Rome Airport to strengthen business in the southern hemisphere. Lufthansa is too concentrated on the northern hemisphere, the top Lufthansa official analyzed a few months ago.

>> Read also: The betrayed passenger: How Lufthansa forgets its customers in the frenzy of growth

At the same time, the CEO wants to become more independent of the German labor market. Lufthansa wants to hire around 1,000 new employees per month. In the home market alone, Spohr explained at the beginning of March when the annual balance sheet for 2022 was presented.

In a first step, the group only takes over a minority, the Italian state remains on board for the time being. This has several advantages. Lufthansa does not have to assume possible residual risks resulting from Alitalia’s insolvency. For example, there are still lawsuits from former Alitalia employees. Lufthansa does not have to process the losses from the new acquisition in its own balance sheet for the time being.

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That should also be a clear signal to investors. At the Annual General Meeting in early May, management felt the skepticism of some shareholder representatives. In the past, Lufthansa has not covered itself in glory when it comes to integrating acquired companies, said Henrik Pontzen, Head of Sustainability at Union Investment: “We do not believe that the takeover of the loss-making Italian ITA will pay off for the shareholders.”

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Ingo Speich, Head of Sustainability and Corporate Governance at Deka Investment, can understand the strategic justification for the deal. But he is also looking at the transaction with a certain skepticism. “We ask ourselves why Lufthansa thinks it can be particularly successful with ITA,” he said at the Annual General Meeting: “Well-known local owners have not been able to stop ITA’s decline in the past .”

More: Lufthansa share is again a candidate for the Dax

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