Lufthansa gets EU nod for ITA deal in win for Italy’s Meloni

Deutsche Lufthansa AG’s €325 million ($350 million) investment in Italy’s ITA Airways won approval from the European Union, allowing Prime Minister Giorgia Meloni to offload responsibility for an airline whose predecessor has been a drain on state resources for decades.

The European Commission said on Wednesday it approved the planned deal after accepting a slate of concessions aimed at preserving fair competition on key routes out of Italy to the rest of Europe and North America.

“We needed to prevent that passengers end up paying more or end up with fewer and lower quality air transport services,” the EU’s competition chief Margrethe Vestager said in a statement, adding that proposed remedies address the commission’s competition worries. 

The approval from EU watchdogs puts an end to months of uncertainty over the future of the deal — in which Lufthansa will initially buy 41% of the successor to failed flagship Alitalia from the Italian state, with an option to acquire the rest later. 

Lufthansa shares rose on the decision, which was swiftly welcome by Italy’s government.

“As an Italian citizen, and as a minister, what makes me happiest is that Italian taxpayers won’t have to put additional billions to cover for ITA losses,” Finance Minister Giancarlo Giorgetti said during a press conference in Rome Wednesday.

The transaction had earlier seemed on the brink of collapse, as EU regulators pressed the parties for better concessions in a bid to preserve fair competition on flights out of Milan Linate and Rome airports, with particular concerns emerging over ensuring fair competition on transatlantic routes.

ITA Chairman Antonino Turicchi said during the event in Rome that remedies offered to the EU to clear the deal will weigh less than 1% of the airline revenue.

The sale of ITA is in line with Meloni’s efforts to meet a €20 billion privatization target, which Giorgetti confirmed during the press conference. While her right-wing government will not immediately cash in millions as part of the deal, it will limit exposure to an industrial liability which has weighed on public coffers to keep flying.

For Meloni, the deal also marks a symbolic element of pride as several governments before hers, including the one led by Mario Draghi, failed to put a definitive end to the Alitalia saga.

The transaction had been closely watched in the aviation industry as an indicator of how the much overdue consolidation in the European market might progress. Lufthansa and the Italian government had grown increasingly frustrated with the pushback from Brussels in recent months, with Lufthansa CEO Carsten Spohr saying that he could well live without the Italian business, while the same couldn’t be said of ITA without Lufthansa.

Under the terms of the EU decision, Lufthansa and the Italian government have to make available to at least one rival airline the assets for them to operate non-stop flights between Rome or Milan and certain airports in Central Europe. Lufthansa will also transfer take-off and landing slots at Milan Linate airport for certain European routes. 

For long-haul flights, the new company had pledged to enter into agreements with rivals to improve their competitiveness, by way of interlining agreements or slot swaps. 

The EU commitments require Lufthansa to obtain approval from the European Commission for remedy takers before the deal can finally close, the bloc’s regulators said. This means that EU regulators will have to double check if the airlines selected to benefit from the concessions will preserve competition.