Rome validates the sale of part of ITA Airways to Lufthansa

Last minute turbulence almost derailed the agreement. But Lufthansa and the Italian government have finally overcome their differences over the final price of the sale of state-owned ITA Airways to the German airline giant.

“Final approval from the European Commission is awaited with confidence to proceed with the finalization of the transaction”underlined, Monday, November 11 evening, the Italian Ministry of the Economy, which announced that the agreements concerning the remedies to be sent to Brussels to guarantee competition were left on time, since the deadline set for the company Germany and in Rome was set for Monday midnight.

The Italian Minister of the Economy, Giancarlo Giorgetti, ended up signing the document negotiated with Brussels, which had called for the transfer of a series of airport slots to other companies to safeguard competition .

The Italian state and Lufthansa had sealed an agreement in 2023 on the entry of the German group into the capital of ITA Airways, after years of unsuccessful searches for a buyer for its ancestor Alitalia. Under this agreement, Lufthansa intends to initially acquire a minority share of 41% of the Italian public company for 325 million euros, reserving the option of increasing to 100% in the medium term. “The economic conditions envisaged have not changed compared to the agreement already signed” in May 2023, noted the Italian ministry.

Lufthansa requested a discount in vain

According to the Italian press, Lufthansa had requested, ultimately in vain, a discount of 10 million euros concerning the next phase which provides for the acquisition of an additional 49% share for also 325 million euros. Taking advantage of review clauses provided for in the marriage contract, Lufthansa would have invoked a loss in value of ITA Airways expected in the last quarter of 2024 to justify a price reduction.

Faced with the impasse over the sale price of ITA Airways, Giancarlo Giorgetti had refused a week earlier to sign the package of remedies intended for Brussels, unlike Lufthansa. Asked by journalists on Thursday about a possible summit meeting with Lufthansa CEO Carsten Spohr, he replied that “that would be appropriate”.

In July, Brussels gave a first conditional green light to this marriage, asking the two companies to restrict certain routes to preserve competition. The deadline for sending the last documents was set first for November 4 and then for November 11.

In January, the European Commission opened a “thorough investigation” on the operation, fearing a possible reduction in competition on several short and long-haul routes to and from Italy. The acquisition by Lufthansa should allow the German giant to expand its access to the Italian market, the third largest within the European Union, while providing ITA with a solid shareholder.

A rapprochement strewn with pitfalls

Brussels gave the green light for ITA to take off in 2021 and authorized financing of 1.35 billion euros in public funds, on the condition that it ultimately ends up standing on its own two feet.

The merger between Lufthansa and the Italian state-owned airline has been fraught with pitfalls. The final agreement concluded with ITA Airways comes after two failed attempts by Lufthansa to acquire a stake in Alitalia, in 2009 and 2019.

Once again a candidate alongside the Italian-Swiss maritime transport giant MSC in January 2022, she was pipped to the post by the American investment fund Certares. The offer from Certares, associated with Air France-KLM and Delta Air Lines, was retained by former Prime Minister Mario Draghi for exclusive negotiations, before being rejected by his successor, Giorgia Meloni, in favor of Lufthansa .

The final obstacle was that negotiations with the European Commission dragged on. After the conditional authorization given in July, Lufthansa and ITA Airways are now awaiting its final verdict.