European Union views Lufthansa's potential takeover of ITA Airways with concern

30-03-24

The European Commission has raised concerns about the proposed partial takeover of Italy's ITA Airways by Lufthansa and its effect on competition in its preliminary view on the deal.

The Commission opened an investigation into the acquisition in January 2024 and had already expressed concerns that it could reduce competition in the European passenger air transport market, but has now formally notified Lufthansa and its partner, the Italian Ministry of Economy and Finance (MEF), the current owner of ITA following the bankruptcy of its predecessor Alitalia, of its opinion.

A statement said the investigation had highlighted concerns that the acquisition could reduce competition on short-haul routes from Italy to Central Europe and on long-haul routes between Italy and the U.S., Canada and Japan.

In addition, the Commission was concerned that the transaction would "create or strengthen ITA's dominant position" at Milan-Linate airport and make it more difficult for its competitors to provide services from the airport.

In response, Lufthansa stated that it would submit remedies to the Commission's concerns by the April 26 deadline and that it remained confident that ITA would become "part of the Lufthansa group family this year," a view echoed by MEF.

First announced in January 2023, Lufthansa's proposed €325 million ($351 million) acquisition of the Italian airline, currently owned by MEF following the bankruptcy of its predecessor Alitalia, would give the German airline group a 41% stake in the flag carrier.

While the Commission's concern over the partial acquisition may temporarily delay the closing of the deal, it is unlikely to deal a lasting blow to the deal, which could resurface with concessions similar to those in the acquisition of Asiana Airlines by Korean Air, recently approved by the EU after the Korean flag carrier agreed to give up parts of the business.