Lufthansa ready to ground Ita at excessive cost

Back in the spotlight Ita Airways, the national airline born from the ashes of the old Alitalia, still enclosed in a bubble of uncertainty about its future fate. The Air company Lufthansa has in fact mentioned abandoning the acquisition, if theEuropean antitrust will prove to be particularly severe, but in this case it will mean reviewing the entire future development plan of the Italian company, which has not found other buyers and risks being pulverized from a stand-alone perspective.

Lufthansa offered 325 million for acquire a 41% stake of Ita Airways from the Italian State. Resources that are crucial for the Italian airline and which will be paid as part of a capital increase of Ita Airways.

Lufthansa expects news soon

The German airline, Reuters reported over the weekend, awaits clarification by the European Antitrust in the next weeks, although the rules give the competition watchdog until June for a formal response. The Antitrust investigation can last up to 90 days and so, in this case, it should close by June 6th 2024, subject to further extensions of 15-20 days at the request of the parties, or a broader postponement through a procedure known as “stop-the-clock”.

What does the EU Antitrust want

The European authority in particular wants to understand whether the transaction may reduce competition on routes a short range which connect Italy with Central European countries, especially some where there is not much competition from other carriers, and for routes long range towards North America. In particular we want to understand if Ita Airways, Lufthansa and their partners United Airlines and Air Canada may be considered as a single entity after the merger. There is also the possibility that the operation could give rise to a dominant position for Ita at Milan Linate airport, or strengthen it, making it more difficult for competitors to provide air passenger transport services to and from Milan Linate.

The Germans’ warning: “Let’s leave if the cost is excessive”

Lufthansa, in addition to awaiting feedback from the EU shortly, is counting on a lenient verdict, which will allow it to acquire Ita Airways with some specific, but not too binding, commitments. The Germans have already made it known that they will back out of the deal if the conditions imposed by the antitrust will be excessively limiting e if “the costs will be excessive compared to the benefits”. The EU could in fact ask the German carrier to have to give up slots, traffic and aircraft rights to allow the entry of another carrier as happened for other similar operations.

Delays would be fatal for Ita

Any delay would be fatal for the Italian airline, a small carrier born in the shadow of the old Alitalia and with a Growth plan focused on acquisition effectiveness. The failure of the operation would therefore be disastrous, and would force the company to review future growth plans, even if financial stability is not at risk. The company itself specified this, confirming that “it is going go forward alone, is recording good results, but he needs a partner for development and this is also foreseen in the initial industrial plan”.

Water on the fire

Meanwhile, the Competition Commissioner Margrethe Vestager he attempted to throw water on the fire, explaining that is being “actively discussed” with Lufthansa and Ita “to see how to intervene”, but the EU always tries to make minimal requests and then “it is up to the companies to find the balance between the problems that need to be solved and the wisdom of the operation”. Vestager later admitted “It’s a difficult fusion case”but “it’s a fusion like other cases that I saw”.

Minister Adolfo Urso also assured “we are waiting for the commission to decide in a reasonable time”, adding “it is good that this happens to clarify and we obviously believe that it can and must decide in favor of this project which strengthens the European aeronautical industry”.