Lufthansa Secures ITA Airways Merger: A New Era for Italian Aviation?

The Lufthansa Group posted “Finally, a YES to ITA” on all its social media platforms following the momentous decision by the European Commission (EC) to grant approval for Lufthansa to acquire ITA Airways after a thorough and rigorous seven-month negotiation process.

This merger is expected to bring about a significant transformation in the Italian aviation sector, which has struggled due to decades of poor performance, ultimately leading to the collapse of Alitalia, its historic flag carrier.

As published by both airlines earlier today, the successful takeover by the Lufthansa Group is subject to the fulfillment of specific conditions aimed at safeguarding market competition, ensuring a fair and balanced playing field for all stakeholders involved.

A Historic Decision

After undergoing a rigorous review by the EC, the proposed merger between ITA Airways and Lufthansa has finally received approval.

“The approval from Brussels is excellent news for ITA Airways and Lufthansa, and especially for all passengers flying to and from Italy,” said Carsten Spohr, the CEO of the Lufthansa Group.

Photo: ITA Airways, Airbus A330-900neo. Courtesy of ITA Airways.

“This decision also serves as a clear indication of the strong position of European air traffic in global competition,” he added.

The Italian Economy Minister Giancarlo Giorgetti acknowledged the complexity of the negotiations between the Italian government, the German conglomerate, and ITA Airways, stating, “Today we positively conclude a historic, long-standing issue of the national carrier that has characterized public debate for 40 years.”

Photo: Lufthansa Group’s Board of Directors. Courtesy of Oliver Roesler / Lufthansa.

“This is a success for this government and, above all, for this country,” said Giorgetti, who emphasized the importance of having a reliable operator like Lufthansa guaranteeing the development of air traffic to and from Italy. Giorgetti assured that ITA Airways and Lufthansa would no longer need state aid, marking a new era for the national carrier.

“The winners are our travelers, but also the respective countries and the EU,” added Spohr. “This is a market-friendly operation.”

As part of the agreement, Lufthansa plans to acquire an initial 41 percent stake in ITA Airways for 325 million euros through a reserved capital increase. This investment is expected to be finalized in the fourth quarter of 2024, following the implementation of agreed-upon remedies and approval from non-EU competition authorities.

Photo: Italian Economy and Finance Minister Giancarlo Giorgetti, Lufthansa’s CEO Carsten Spohr, and ITA Airways President Antonino Turicchi. Courtesy of ITA Airways

Lufthansa will also have the option to increase its stake in the Italian carrier to 90 percent and eventually attain full ownership by 2033, with a total investment of 829 million euros.

Conditions for the Merger

As noted by Leonard Berberi — an expert journalist from Corriere della Sera — the merger’s approval comes with a set of conditions. Lufthansa and ITA Airways must relinquish 15 airport slots at Milan Linate (LIN), regarded as one of Europe’s most coveted airports, which translates to 30 daily flights.

This measure aims to open up opportunities for other airlines and prevent the dominance of a single entity at this key airport.

Photo: Courtesy of SEA / Milan Linate Airport

Additionally, Berberi reports the merged entity must establish an agreement with another airline, potentially easyJet, to introduce competition on specific intra-European routes where they could otherwise hold a dominant position.

Furthermore, both airlines must implement measures such as introducing a direct competitor or establishing strict travel time and layover requirements to ensure fair competition on long-haul routes between Rome and North America to prevent the creation of a monopoly on certain city pairs.

Integration Process

The inclusion of ITA Airways into the Lufthansa Group will create significant synergies through utilizing Lufthansa’s extensive global sales network, its renowned Miles & More frequent flyer program, and the collaborative procurement of aircraft and fuel.

ITA Airways will join the German group’s vast airline portfolio, which includes Austrian Airlines, Brussels Airlines, Lufthansa City Airlines, Discover Airlines, Eurowings, Air Dolomiti, and Swiss Air Lines.

Photo: Frankfurt Airport. Courtesy of Juho S / Unsplash

With this merger, Italy will solidify its position as the Lufthansa Group’s fifth primary market, substantially contributing to the group’s overall revenue.

As noted by Spohr at the IATA AGM in Dubai to Business Traveler, Italy is already the second most important market for Lufthansa, after the USA, owing to its status as a premier tourist destination and its robust, export-oriented economy.

Moreover, Rome-Fiumicino (FCO) will become the group’s sixth and southernmost hub, strategically improving connectivity to Africa, Latin America, and the Middle East, thereby creating over 1,000 new transfer options for customers.

Photo: Lufthansa Group’s CEO, Carsten Spohr. Courtesy of Oliver Roesler / Lufthansa.

“Our guests will benefit from an expanded choice of connections and destinations. Furthermore, with the establishment of a 5-star hub in Rome, we will enhance our premium offering and establish better connections to strategically important future markets south of the equator within our network,” Spohr said.

Future Steps and Alliances

The next steps to finalize the merger, according to Berberi, involve a meticulous implementation of the agreed remedies within four months. Following this, the capital increase, statutory changes, and the appointment of a new board of directors will take place.

The new board at ITA Airways will reportedly include three members from the Italian Ministry of Finance—including the president—and two from Lufthansa, who will appoint the new airline’s CEO.

Photo: Courtesy of Star Alliance

One significant aspect of the integration plan is ITA Airways’ transition from the SkyTeam alliance to Star Alliance, a process expected to take about 12 months. During this period, codeshare agreements will be established to enhance commercial activities and offer customers a wider range of options.

“We have negotiated the timing and costs of leaving SkyTeam,” said ITA Airways president Antonino Turicchi. “Then we will enter Star Alliance—initiating the codeshare mechanisms as soon as possible, which are fundamental for commercial activity.”

The inclusion of ITA Airways in Star Alliance is a significant achievement for both entities. The alliance currently operates an extensive network, offering over 17,000 flights every day to a vast network of more than 1,200 airports across 190 countries. Notably, it was honored with the title of the world’s best airline alliance at the recent SkyTrax awards, and it also secured the top spot in the Business Traveler Awards last year.

Photo: ITA Airways, Airbus A330-200 “Francesco Totti.” Courtesy of ITA Airways / Alfredo Falcone

On the frequent flyer front, Lufthansa has confirmed that all members of the ITA Airways loyalty program Volare will be able to collect or use their miles with Miles & More from the first day after the closing. Additionally, lounges from both airlines will be accessible to all members.

The airline group celebrated the approval across all its social media channels. However, it stated that until the Italian carrier completed its merging process, “ITA Airways and Lufthansa Group remain competitors.”

Bright Future for ITA

The merger between ITA Airways and Lufthansa marks a strategic alignment set to elevate the competitiveness and service offerings of both airlines. Following approval from the EC and the necessary implementation of remedies, this merger signals the beginning of a more integrated and dynamic European aviation market.

Photo: Business Class, ITA Airways, Airbus A330neo. Courtesy of ITA Airways.

Following the acquisition by the Lufthansa Group, ITA Airways brings with it a market that catered to 15 million passengers across 69 destinations. Its fleet consists of 96 Airbus jets, including 23 wide-body aircraft and 73 narrow-body aircraft. Additionally, it provides access to one of the world’s top tourist destinations and offers strong cargo opportunities due to the high-quality manufacturing products produced in Italy.

Spohr also highlighted that ITA Airways, with its almost 5,000 employees, would bring additional international diversity to the Lufthansa Group’s corporate culture.

Overall, this merger promises passengers improved connectivity, expanded travel options, and the advantages of a strengthened airline alliance.

As aptly summarized by Spohr, “Despite the comprehensive and far-reaching concessions, the investment in ITA Airways strengthens the Lufthansa Group’s position in global competition. We will integrate ITA Airways as a strong and successful part of our company, securing its future as an international airline and a strong brand. ITA Airways will bolster our efforts to further solidify our position as the leading airline in Europe.”