Lufthansa Acquires 41% Stake In Italy’s ITA Airways: It’s A Done Deal!

For years, Italy has been trying to privatize its struggling national carrier. This was the case when Alitalia existed, and it continued to be the case with the new version of the airline, ITA Airways.

Since ITA Airways was formed in 2021, the Italian government has been working on privatizing the airline. In 2023, Lufthansa Group expressed interest in acquiring a major stake in ITA Airways. For nearly two years now, that has been in process, as a deal first had to be negotiated, then it needed to get regulatory approval, etc.

Well, today is a huge day for European aviation. Lufthansa’s investment in ITA Airways has been completed, so ITA Airways is now officially a Lufthansa Group carrier!

Lufthansa Group finalizes investment in ITA Airways

Lufthansa Group has acquired a 41% stake in ITA Airways for a capital contribution of €325 million, and the transaction was finalized today at a meeting for shareholders. Lufthansa Group also has the right to acquire the remaining shares of ITA Airways at a later date, and the plan is for that to happen, until Lufthansa owns 100% of the airline. It’s expected that the entire transaction could cost over €800 million.

With the company’s new ownership structure, Jörg Eberhart has been appointed CEO of the airline. He’s the former CEO of Air Dolomiti, Lufthansa’s longstanding Italian subsidiary. Meanwhile Sandro Pappalardo has been appointed President of ITA Airways. Meanwhile ITA Airways’ existing CEO, Fabio Lazzerini, will no longer be at the airline.

In order to get this deal approved, the airlines had to agree to some concessions. The biggest compromise is that Lufthansa and ITA Airways have to give up slots at Milan Linate Airport (LIN) to competitors, because otherwise the airlines would be too dominant there. For example, EasyJet has already announced that it’s setting up a base at the airport, and ITA Airways will even have to wet lease planes to EasyJet to make this happen.

Furthermore, Lufthansa and ITA Airways are responsible for ensuring there’s more competition out of Rome Fiumicino Airport (FCO), in particular to hubs of Star Alliance carriers in North America.

Here’s how Lufthansa Group CEO Carsten Spohr described this takeover when it received regulatory approval, several weeks back:

“The approval from Brussels is excellent news for ITA Airways and Lufthansa and especially for all passengers flying to and from Italy. We look forward to welcoming ITA Airways and its outstanding employees as a new member of our airline family very soon. The decision is also a clear signal for strong air traffic in Europe, which can successfully assert itself in global competition.”

“The acquisition of ITA Airways strengthens the internationalization of the Lufthansa Group. We offer our guests a significantly greater choice of connections and destinations, and with the 5-star hub in Rome we are also extending our premium offering and better connecting strategic future markets south of the equator to our network. Despite the comprehensive and far-reaching concessions, the investment in ITA Airways strengthens the Lufthansa Group’s position in global competition. We will make ITA Airways a strong and successful part of our company and thus secure its future as an international airline and strong brand. ITA Airways will support us in further expanding our position as Number One in Europe.”

ITA Airways becoming a Lufthansa Group airline

With Lufthansa’s investment in ITA Airways having closed, ITA Airways is expected to shortly start cooperating with Lufthansa Group on a commercial and operational level, to benefit from group synergies.

The plan is for ITA Airways to become the fifth network carrier in Lufthansa Group’s multi-brand and multi-hub system, complementing Lufthansa, SWISS, Austrian, and Brussels (and on top of that, Lufthansa Group has some further subsidiaries).

Furthermore, ITA Airways plans to use Miles & More as its frequent flyer program (replacing ITA Volare), and also plans to join the Star Alliance, though an exact timeline for that hasn’t yet been announced.

Lufthansa Group managed to negotiate that ITA Airways can join the Star Alliance transatlantic joint venture, allowing the Italian carrier to coordinate routes, schedules, and fares, with Air Canada, Lufthansa, SWISS, United, etc.

Italy is Lufthansa Group’s most important market outside the group’s home base countries and the United States, which is why this acquisition was so important to Lufthansa Group.

My take on Lufthansa’s ITA Airways investment

Where do we even begin here? First of all, let me acknowledge that I can appreciate how Italy is an important market for Lufthansa, and how investing in ITA Airways is the easiest way that Lufthansa can considerably grow market share there.

Historically Lufthansa’s biggest challenge in Italy has been competing with SkyTeam, between Alitalia and Air France-KLM. Alitalia belonged to SkyTeam, and ITA Airways had also joined the SkyTeam alliance when the new company was formed. With ITA Airways having cooperated with Air France-KLM and Delta, Lufthansa struggled to grow beyond its current position, especially for long haul service.

So this investment by Lufthansa largely seems to be about poaching market share in Italy from competitors. At the same time, Lufthansa has an uphill battle with making this investment work. Alitalia had been losing a lot of money for a very long time.

However, things are looking a bit better at ITA Airways. While the airline lost €486 million in its first year of operation (2022), the airline made a profit of €70 million in its second year of operation (2023), which is nothing short of a miracle for an Italian network carrier.

With that in mind, a few thoughts and questions:

• I’m curious what this means for Air Dolomiti, which is another Italian airline that Lufthansa already owns; will Air Dolomiti be merged into ITA Airways, or will it continue to operate independently?
• Even with Lufthansa initially only owning a minority stake in the airline, hopefully Lufthansa is put in charge of day-to-day operations, or else I could see co-owning the airline with the Italian government being challenging
• While Italy is a huge tourist destination, it’s a tough market for a global network carrier; the country doesn’t have great geography for transatlantic connections to Western Europe, Italy is more of a leisure-oriented destination, competition on short haul flights from ultra low cost carriers is fierce, etc.
• I am excited about ITA Airways joining Star Alliance, since this should be good in terms of award options (generally Star Alliance is better with partner awards than SkyTeam)
• Carsten Spohr is going to have an absolute ball with labor relations at ITA Airways, methinks!

Bottom line

Lufthansa Group has officially completed its investment in ITA Airways, as the German airline group now owns a 41% stake in Italy’s national carrier. The plan is for Lufthansa to progressively increase its investment in the airline, until it owns the entire company.

With the transaction having closed, ITA Airways will now fully become a Lufthansa Group airline, will join Star Alliance and the Star Alliance transatlantic joint venture, and will even adopt Miles & More as its frequent flyer program.

What do you make of Lufthansa Group now owning a stake in ITA Airways?