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 October 2021, several parties have expressed interested in acquiring the airline.
In the spring of 2023, we learned how Lufthansa Group intended to buy a major stake in ITA Airways. However, actually closing the deal has taken a long time, both due to the need for regulatory approval, and due to some disagreements between Lufthansa Group and the Italian government.
Well, there’s now a significant update — the European Commission has issued the last approvals needed for this deal, and the transaction should close in early 2025.
In this post:
EU approves Lufthansa’s ITA Airways investment
Lufthansa Group is acquiring a 41% stake in ITA Airways for a capital contribution of €325 million, and the transaction will close in very early 2025. This agreement also gives Lufthansa 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.
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 describes this takeover:
“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 will become a Lufthansa Group airline
So, what’s Lufthansa’s plan for ITA Airways? Upon closing of the transaction in early 2025, ITA Airways is expected to immediately 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.
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 is 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 has joined the SkyTeam alliance as well. 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. 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 gotten the green light to acquire a 41% stake in Italy’s ITA Airways from the Italian government. The plan is for Lufthansa to eventually take full control of the airline.
The deal should be complete in early 2025, at which point ITA Airways will 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 investing in ITA Airways?
Ben- I've noticed on Virgin Atlantic's website that there appears to be no award availability (zero) past March 2025. I only checked MIA to FCO. It could be the usual website glitchiness...or maybe ITA pulled award availability past March until the LH picture becomes clearer (possible move of ITA to Star Alliance?). Since most of us are on the site to try to use of miles wisely, please share any knowledge or data points you...
Ben- I've noticed on Virgin Atlantic's website that there appears to be no award availability (zero) past March 2025. I only checked MIA to FCO. It could be the usual website glitchiness...or maybe ITA pulled award availability past March until the LH picture becomes clearer (possible move of ITA to Star Alliance?). Since most of us are on the site to try to use of miles wisely, please share any knowledge or data points you have on the future of redeeming Virgin Atlantic or Flying Blue miles for ITA flights. Thx
Too bad. I had some very cheap awards using Virgin miles on ITA.
I would argue that for LH, it is not just about "stealing market share" but also put back in play a plan they had for over two decades... Anyone remember Air One? I do recall flying on the airline once because it was a partner of Aeroplan back in the days, with close ties to LH and all this fell apart when Alitalia ultimately took over the airline in 2009. Air Dolomiti in my mind always had limited reach (and usefulness)
Well, that's the end of product innovation at ITA, which will be subject to the same sclerotic, penny-pinching, bureaucratic naysaying from Köln that hobbles the rest of the companies in the group.
"Death by committee" is an apt description.
Does this mean United will further expand with more flights to Italy?
What will be lost are sweet spot short haul redemptions via Virgin.
i had a boss who often said "you can't shine s..t."
With Star, you'll go far. With Sky, you'll probably die. With DL, you'll burn in hell.
Germany and Italy join forces again, after Germany and Austria already did. I don't know where I heard this before, but it somehow rings a bell...
Star Alliance? More like Star Axi-
Inapproriate ignorant and insensitive comment but probably 100% right one
The first casualty of this will likely be the presence of the Pasta PLUS main course on the business class menu, for long the only remaining vestige of a long gone alitalia heyday. I hope i’m wrong, but I see AZ catering soon aligning to teutonic standards
I have the same worry. Maybe they'll cede to local cultural custom, which they do with Austrian and Swiss.
Italian premium fliers have a certain expectation, particularly if they want to keep the regulators in Italy happy.
The J meal service is a point of differentiation.
Austrian and Swiss are deteriorating their products to the Lufthansa level. It happens slowly but it does. The quality of meal is still okayish and not quite as tragic as LH, since that's within the control of local managers, but the overall service concept is unified.
Ben, my wife and I have ITA business class FCO-SFO next May booked through Air France with Flying Blue miles. Any potential issues, tips, etc with that regarding the changeover to LH ownership? In case of irrops who's responsbile? Thanks.
I’m in the same boat. I found a cheap cash fare on ITA J this summer from Cairo (LOL!) to SFO for a little over $1400. Economy one-way fares from SFO to FCO were $1300. I’m looking forward to the flight, but hope Lufthansa doesn’t make any changes to ITA that soon.
Was hoping for 2024 close so we might have time for star alliance partner integration/awards open for summer 2025 but that seems questionable at this point
Please, PLEASE tell me that my ITA flights on 6 February will still go to SkyTeam. Because if not, I’m so screwed with my FB platinum renewal..
It's December tomorrow. The switch won't happen within two months :)
Book those solid virgin flying club redemptions while you still can!
Speaking of the Lufthansa Group, in somewhat related news, ANA will be using JFKs new Terminal 6 aside from the Lufthansa Group, CX, and Aer Lingus. I wonder if they could all fit in there; how many LH group aircraft are parked at JFK at one time anyway?! And apparently, you can board your flight directly from the lounge which I'm sure Ben will be happy to hear! :D
https://www.anewjfk.com/wp-content/uploads/ANA-selects-new-JFK-Terminal-6-for-operations-in-2026_Nov212024.pdf
Speaking of the Lufthansa Group, in somewhat related news, ANA will be using JFKs new Terminal 6 aside from the Lufthansa Group, CX, and Aer Lingus. I wonder if they could all fit in there; how many LH group aircraft are parked at JFK at one time anyway?! And apparently, you can board your flight directly from the lounge which I'm sure Ben will be happy to hear! :D
https://www.anewjfk.com/wp-content/uploads/ANA-selects-new-JFK-Terminal-6-for-operations-in-2026_Nov212024.pdf
ITA joining the transatlantic joint venture means that prices will be fixed at a high level like they currently are with Lufthansa, United, Swiss and Austrian.
"Carsten Spohr is going to have an absolute ball with labor relations at ITA Airways" - You mean he's gonna blow 350 million euros during strikes only to give unions everything they asked for in the end anyway, like he did with LHG strikes last year? :)
The ITA acquisiton allows Lufthansa to cut Europe right down the middle. With its trunk, discount, and regional carriers, Lufthansa achieves economy of scale via consolidation of its back office operations.
The biggest issue is Taming the Shrew called ITA. Should be interesting!!
Lufthansa will first and foremost acquire monopoly on even more routes. I can understand why EC had to approve this deal (even though legally speaking it seriously shouldn't have been), but why on Earth do Italian politicians and their electorate think this is good for them is beyond me.
italian politicians can’t care less about their electorate
All they want is goodies deposited into their Lugano accounts and (for the lower and mid ranks) free Senator and HON circle cards