Lufthansa is apparently making good progress in talks about taking over the Italian airline.
(Photo: AP)
Frankfurt Lufthansa boss Carsten Spohr is confident that talks about a takeover of the Italian airline ITA can be successfully concluded in the next few weeks. Most of the questions have now been clarified in the negotiations with the Ministry of Finance in Rome, the manager said on the sidelines of an industry event in Brussels. Now it’s about the price. “ITA lost a lot of money. That has to be taken into account in the assessment,” said Spohr.
For several weeks, representatives of Lufthansa and the Italian government have been negotiating the details of a takeover exclusively. The prerequisite for this was created in January when the MDax group and the Italian Ministry of Finance signed a declaration of intent on the sale of a minority stake.
Time is running out. Last year, ITA made a net loss of 486 million euros on sales of 1.6 billion euros. According to the company, the causes were the rising kerosene prices and the general economic situation. Spohr said he was confident that an agreement could also be reached on the price. He himself will fly to Rome on Thursday for further talks.
ITA is the successor airline to the traditional but insolvent Alitalia. With a good 60 aircraft, it is significantly smaller than Alitalia and has also been freed from many financial legacy issues. This is what makes the company so interesting for Lufthansa.
At the same time, the Lufthansa management must ensure that the risk remains manageable. Europe’s largest airline group has only just left the severe corona crisis behind and also needs a lot of money for urgently needed investments in the fleet, for example. Alex Irving of Bernstein Research recently described the takeover as one of the most challenging projects in European aviation.
Lufthansa initially only wants a minority stake in ITA
The team around Spohr therefore wants to take over only a minority in a first step, the Italian state should remain responsible for the time being. This also applies to possible residual risks that could result from Alitalia’s insolvency. For example, lawsuits from former Alitalia employees are still ongoing. In addition, Lufthansa would not have to process the losses in its own balance sheet for the time being. Lufthansa took a very similar approach years ago when it took over Brussels Airlines.
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In the best-case scenario, the state should only be able to give the remaining shares to Lufthansa when ITA is profitable again. Spohr sees good opportunities for this: “The discussions so far have confirmed to us that the turnaround at ITA is possible if ITA is integrated into our group.”
Parallels to the takeover of Swiss are also often drawn in Lufthansa circles. Like ITA, it was not a hard restructuring case. One element of a potential deal will likely be to grow ITA over the long haul. Rome is to be used and expanded as a hub. This means that ITA should get more long-haul aircraft. In the eyes of experts and Lufthansa management, the current fleet of twelve wide-bodied jets is too small for profitable long-haul business.
With ITA and Rome Spohr wants to expand the business towards the southern hemisphere. The Lufthansa chief considers the growth opportunities in Asia to be manageable. Lufthansa is finding it difficult to compete in Asia against the offers of the airlines from the Persian Gulf. In addition, Lufthansa is still too dependent on the home market of Germany and Europe, Spohr made clear at the beginning of March. Not only is it heavily regulated, it is also too dependent on just one labor market, which is very limited.
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