The planned German carrier Lufthansa ownership of ITA Airways was given conditional permission by the EU on Wednesday. Italy hailed the agreement as a “huge European success.”
One of the biggest airlines in Europe, Lufthansa, agreed to pay 325 million euros ($350 million) for a 41 percent share in ITA last year. As part of the capital increase, the Italian finance ministry also contributed 250 million euros.
The agreement will increase the German airline’s footprint in Italy and expand its route network to include new destinations in Africa, South America, and the Middle East.
But because the European Commission launched a thorough investigation in January out of concern that it would harm competition, it had to go through a difficult process to win
regulators’ permission.
Now that those concerns have been allayed by a bundle of promises from Lufthansa and the Italian government, the commission, the EU’s antitrust watchdog, has approved the deal.
Lufthansa CEO Carsten Spohr stated in a statement that “the investment in ITA Airways strengthens the Lufthansa Group’s position in global competition, despite the comprehensive and far-reaching concessions.”
“This positive conclusion is truly a success,” Giancarlo Giorgetti, the minister of economics of Italy, said at a Rome press conference.
“It has been a complicated, troubled, difficult path, but… it is a big Italian success, it is a big German success, it is a big European success,” added Giorgetti.
However, the European Consumers’ Union (BEUC) expressed disapproval over the scant information provided by the parties engaged regarding their obligations.
Agustin Reyna, chief of BEUC, which represents consumers in 31 countries, stated, “We fear that consumers may pay the price for this merger in the form of higher fares, less choice of routes, and degraded services due to the current lack of clarity.”
A concession to competitors
Through the agreement, Lufthansa gained a number of options to either acquire ITA Airways fully or raise its ownership in the state-owned airline that replaced Alitalia in the future.
According to the commission, one or two competing airlines could be allowed to start non-stop service between Rome and Milan as well as throughout central Europe as one of the remedies that helped close the agreement.
“These commitments fully address the competition concerns identified by the commission,” it stated. “The decision is conditional upon full compliance with the commitments.”
For short-haul flights, rival airlines will also be given take-off and landing slots at Milan’s Linate airport.
Making agreements with competitors “to improve their competitiveness on the long-haul routes of concern” between Italy and the US and Canada is one of the other requirements to be fulfilled.
This could involve airlines coordinating with one another on specific parts of travel, including ticketing, or slot swaps at airports or interlining agreements.
“This will lead to increased frequencies of nonstop flights and/or improved connections for one-stop flights on each of the routes,” according to the commission.
“Insufficient lucidity”
From the ashes of Alitalia, which was placed under state administration in 2017, ITA Airways was established.
Alitalia lost 11.4 billion euros in total between 2000 and 2020. Before it was reborn as ITA, it was eventually shut down in October 2021.
The European Union aimed to ensure that the Lufthansa agreement did not result in increased costs for customers.
Brussels had been worried that there would be little competition on some short-haul routes between Italy and central Europe and long-haul routes between the US and Canada, which would result in a drop in passenger quality.
“It is crucial to maintain competition in the aviation industry at a time when consumers are paying progressively more for travel,” stated Margrethe Vestager, the EU’s competition commissioner.
She continued, saying that the solutions will guarantee “a sufficient level of competitive pressure remains on all relevant routes”.
