State ITA: Lufthansa bids for Italian airline

Status: 01/18/2023 4:45 p.m

Lufthansa has submitted a bid to the Italian government to join the state airline ITA Airways. In a first step, a minority share is to be acquired.

Lufthansa wants to join the Italian airline ITA Airways. An offer had been made to the government in Rome for a minority stake in Alitalia’s successor, the airline said in Frankfurt. In addition, options to purchase the remaining shares at a later date are to be agreed. The Italian state, as the sole owner, must now examine whether exclusive negotiations for a final purchase agreement can be started.

Around a year ago, Lufthansa and the Swiss shipping company MSC proposed taking over a majority of ITA, but were temporarily out of the running during the privatization process that was controversial in the election campaign. With around 4,000 employees and 66 aircraft, ITA Airways has a market share of around 20 percent in Italy.

Indebted airline to be sold

Amounts for the planned entry were not mentioned for the time being. According to insiders, Lufthansa wants to buy a 40 percent stake in the Alitalia successor for 200 to 300 million euros as a first step, as reported by the Reuters news agency. Negotiations with the Italian government, which wants to sell the shares exclusively to airlines, should be completed in a few weeks.

The Italian Treasury wants to quickly sign a binding letter of intent with Lufthansa, followed by a decision by the state owner to raise capital, according to Reuters from those familiar with the process. Lufthansa explained that there would then have to be further negotiations about the structure of a participation, the commercial and operational integration of ITA into the Lufthansa Airline Group and the resulting synergies.

The offer period for the new sales process closes this evening in Rome. It is still unclear whether another bidder will remain in the running. Most recently, negotiations with the financial investor Certares had not led to a conclusion. The ITA started in October 2021 as a significantly smaller and debt-free successor to Alitalia, which finally had to give up despite large government aid in the Corona crisis. The airline had only flown losses since the beginning.

Lufthansa wants to expand business beyond the Alps

Lufthansa has been trying for years to gain a stronger foothold beyond the Alps. A takeover of Alitalia was also considered several times. Ultimately, the Italian state saved the airline again and again with large financial injections.

With ITA Airways, which also includes Eurowings, Austrian Airlines, Brussels Airlines and Swiss, Lufthansa could strengthen its position in Europe’s most important foreign market. And the Italian airline could expand its long-haul business. In the longer term, Lufthansa could then become the majority shareholder, because the Italian state is aiming for complete privatization.

The news initially did not trigger any significant price movement on the stock exchange. The Lufthansa share had already gained five percent in the morning after positive business figures from its US partner United Airlines and was recently up more than four percent. The planned entry into ITA has been an issue for a long time, and the content of the current bid had already been leaked out beforehand.

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