Lufthansa Wants To Buy Majority Stake In ITA Airways

Lufthansa Wants To Buy Majority Stake In ITA Airways

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For the past several weeks there have been rumors of Lufthansa Group being in discussions to buy a stake in ITA Airways. Late last week there were reports that Lufthansa may be looking to buy a 40% stake in ITA Airways. As it turns out, this is even more serious than that — it has now been confirmed that Lufthansa is looking to buy a majority stake in the airline.

Lufthansa plans to invest in ITA Airways

ITA Airways, which is Italy’s new national airline as of October 2021, has announced that Lufthansa and shipping company MSC Group are looking to acquire a majority stake in the airline. Here’s the press release, which contains all the details:

The Company announced that today it has received an Expression of Interest from the MSC Group and Lufthansa to acquire the majority of ITA Airways. The MSC Group has agreed with Lufthansa its participation in the partnership on terms to be defined during the Due Diligence.

Both the MSC Group and Lufthansa have expressed the wish that the Italian Government maintains a minority stake in the Company. Furthermore, the MSC Group and Lufthansa have requested 90 days of exclusivity to work on this Expression of Interest.

ITA Airways is satisfied with the word carried out in recent months to offer the best prospects to the company is starting to have the expected results, providing for a company recognised as viable for partners of international reputation both in passenger and cargo transport. The Board of Directors will examine the details of the Expression of Interest in an upcoming meeting.

This is major. If this were to happen, ITA Airways would likely become a Lufthansa Group airline, operating alongside Lufthansa, SWISS, Austrian Airlines, Brussels Airlines, etc.

Lufthansa plans to buy a majority stake in ITA Airways

What’s Lufthansa’s motive for investing in ITA?

Why would Lufthansa look to invest in ITA Airways? After all, ITA Airways is simply Italy’s new airline that replaces Alitalia, and it’s hard to imagine this airline will be profitable. Despite that, Italy is a very important country for Lufthansa, as it’s Lufthansa’s second largest international market, after the United States.

For that matter, this wouldn’t be the first airline in Italy that Lufthansa invests in. Air Dolomiti is already a wholly owned subsidiary of Lufthansa, though it’s a small, regional carrier. It doesn’t really give Lufthansa all that much beyond connectivity from major hubs in Germany to Italy.

Lufthansa owns Air Dolomiti

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 cooperating with Air France-KLM and Delta, Lufthansa would struggle to grow beyond its current position, especially for long haul service.

So if Lufthansa were to invest in ITA Airways, it seems that it would largely be about trying to poach more market share in Italy from competitors. I could see Lufthansa trying to get ITA Airways into the Star Alliance transatlantic joint venture, though it’s anyone’s guess if that would be approved by regulators.

I don’t see this ending well

I can appreciate why Lufthansa would be interested in growing in Italy, and how there’s value in partnering with a major airline there. For that matter, there had been rumors of Lufthansa investing in Alitalia before the airline ceased operations.

At the same time, I just don’t see this working out the way that Lufthansa hopes. The problems that existed at Alitalia will likely continue to exist at ITA Airways:

  • Lufthansa would be partnering with the Italian government, which didn’t have a great track record of running Alitalia successfully; heck, ITA Airways has lost 170 million EUR since starting operations just a few months ago
  • In fairness, it at least seems smarter (from Lufthansa’s perspective) that the Italian government would be a minority shareholder, rather than the majority shareholder
  • While ITA Airways is much smaller than Alitalia, over time it’s likely that the airline will become bloated and inefficient, like Alitalia was, including having labor issues
  • The Italian short haul market is brutal, given the amount of competition, especially from ultra low cost carriers
  • Italy is a more leisure-oriented destination than Germany and the United Kingdom, for example, so the seasonality can make long haul flying out of Italy tricky
  • Italy doesn’t exactly have the best geography as a connecting hub; for example, for transatlantic flights there’s potentially quite a bit of backtracking for those wanting to travel to other points in Europe

I’m curious to see how this plays out. I think it’s pretty telling how many airlines were interested in investing in Alitalia before the airline liquidated, but ultimately decided against it. While ITA Airways may briefly be a more efficient operation, that’s likely to change over time. Lufthansa seems to be going all-in here, and I’m a bit surprised by that…

Lufthansa wants to grow in Italy, but at what cost?

Bottom line

It has officially been announced that Lufthansa Group and MSC Group intend to acquire a majority stake in ITA Airways. Italy is a huge market for the German airline group, and partnering with Italy’s national airline would give Lufthansa the ability to grow market share. The question is whether Lufthansa can do so profitably.

What do you make of Lufthansa Group investing in ITA Airways?

Conversations (49)
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  1. Peter K Guest

    Likely to be a very bad investment.

    One of the attractions would be the substantial number of slots at slot constrained airports that are owned by ITA. Particularly at Milan and Rome. Also have prime Heathrow slots (worth a fortune - in normal non-Covid times).

    Lufthansa’s strategy has always been owning the majority of slots at slot constrained airports in Germany, Austria and Switzerland to constrain the growth of the LCCs that are...

    Likely to be a very bad investment.

    One of the attractions would be the substantial number of slots at slot constrained airports that are owned by ITA. Particularly at Milan and Rome. Also have prime Heathrow slots (worth a fortune - in normal non-Covid times).

    Lufthansa’s strategy has always been owning the majority of slots at slot constrained airports in Germany, Austria and Switzerland to constrain the growth of the LCCs that are savaging the full service (high cost) European airlines on short haul routes.

    And Lufthansa’s low cost carriers are not low cost.

    I believe it will all end in tears for whoever invests in ITA.

  2. Tom Guest

    What I find interesting is the MSC participation. They are poised to be the largest cruise line in Europe and are one of the largest ship cargo operators in the World. MSC may want to funnel cruise positioning traffic through the proposed Lufthansa/ ITA network. There may also exist air and ship cargo synergies.

  3. Christian Guest

    I don't know about LH but MSC should have bundles and bundles of cash to spend since they just spent the last 2 years charging companies +$20k for containers on their ships that cost $2k BEFORE the pandemic. I have no idea how they have gotten away with this but clearly they have decided to use their buckets of $ to invest in the airline industry.

  4. Mark in Sydney Guest

    It’s actually a smart move. Lufthansa wanted the old Alitalia but without the debt - and that’s what it’s getting. ITA will be rebranded as Alitalia once it’s confirmed there are no debt obligations or labour agreements in place so Lufthansa has a much better chance to make it work.

  5. Endre Guest

    It is just another vanity project of Carsten

  6. Klaus Guest

    @Ben:
    Air Dolomiti also operates flights for Lufthansa from Munich to Leipzig/Prag/Geneva/Bale etc.

    So saying that they offer connectivity in Italy is simply wrong. The only two domestic flights are from Verona to Sardinia (AHO, TTB).

    Air Dolomiti is more like Lufthansa Cityline (or American Eagle or United Express).

    The idea of ITA is to connect North America via Rome with Africa. It would be Lufthansa’s second Africa Hub - the other one being Brussels.

  7. Stuart Guest

    Let's not forget when Lufthansa created an Italian subsidiary a few years ago. It came and went real fast. Tough market. Surprised you never mentioned it in this article as there is some history here already.

    1. Stuart Guest

      For those who didn't know about it, as it came and went so fast, here is a brief Wiki summary:
      https://en.wikipedia.org/wiki/Lufthansa_Italia

    2. Matrix.RX1 Guest

      they also had to leave because local politics for the Milan region did not appreciate their growing of MXP, seen by SEA, the mgmt company belonging to the city of Milan, as a reduction of LIN, the cuty airport that politicians use for Rome. LH wanted to make of MXP their 3rd hub after FRA and MUC.

  8. Alex Guest

    Not too promising for the LH Group, but they would benefit far more than DL on this one. DL already has plenty if its own service into Italy, and a lot of Italy traffic can go over AMS and CDG anyway. They aren’t going to lose much by dumping AZ, which they are doing by default in this case. I don’t see Ed Bastian risking DL money on them in the near future given the loses on the AM and LA investments. Nobody but LH wants to be the new Swissair.

  9. MARK Guest

    Last time Germans lead the Italians , it didn't go well for the Italians

    1. Klaus Guest

      Are you referring to Lamborghini, which is owned by a German company. That goes quite well?

  10. Michael Guest

    Insanity! Plain and simple, unless the unions lost their power at ITA. Even then I don’t see much business sense. The Italian market is difficult. Domestically there are fast trains, within Europe they compete with Ryanair and Wizz Air, and I doubt the long haul network is worth the effort. Feed from wealthy northern Italy to their hubs can be provided by Air Dolomity.
    Of course I get that they want to corner as...

    Insanity! Plain and simple, unless the unions lost their power at ITA. Even then I don’t see much business sense. The Italian market is difficult. Domestically there are fast trains, within Europe they compete with Ryanair and Wizz Air, and I doubt the long haul network is worth the effort. Feed from wealthy northern Italy to their hubs can be provided by Air Dolomity.
    Of course I get that they want to corner as many neighboring markets as possible, but the Cost vs Benefits balance is just not there.

  11. Sasa Guest

    Lufthansa had s/h "Lufthansa Italia" subsidiary from 2009 to 2011, with 9 planes based in Milan and less than 20 destinations. I am also sceptical abt success of ITA even with LH and MSC being majority owners.

  12. guisun Gold

    Wait, where did they get the money to invest when they got money for Covid bailout?

    1. Matt Guest

      And the EU punished them for taking state funds by making them give up about 4 slots. What a joke.

    2. Klaus Guest

      @guisun:
      You are aware that the bailout was in fact a loan?
      Yes, the loan is paid back to the German government including interest.

  13. Phil Guest

    Because this is totally going to work successful isn’t it! (Cough)

  14. Gary Hal Hohenstein Guest

    We see how good the German - Italian joint ventures worked out 80 or so years ago !!! Germans haven't gotten any smarter since then obviously.

    1. Max Guest

      Time to bring in ANA or JAL as well ;)

    2. MARK Guest

      CSA (or what's left of it) next , then LOT followed by KLM & Air France before they choke on Aeroflot.

  15. Andy Diamond

    Together with the already existing market share of the LH group in Italy (including Air Dolomiti) this will without any doubt hamper competition in the Italian market. Yes, there is Ryan Air - same in Spain, but in the Spanish case the EU vetoed the merger of IB and UX. I hope the EU will do the same here …

  16. Lu Guest

    My bet is on EU not approving it, given the market share Lufthansa Group already have in Italy.

  17. Michael Guest

    Carsten Spohr has lost it, buying this pile of junk is beyond insane. God help us all. I will sell my Lufthansa stock.

  18. red_robbo Member

    I hope Lufthansa got a copy of "Dealing with Italian unions for Dummies" for Christmas.
    Why don't they just dig a big hole in the ground, put €500m cash in it and set it on fire? Utter madness. It will all end in tears.

  19. Nate nate Guest

    Re: Italy doesn’t exactly have the best geography as a connecting hub; for example, for transatlantic flights there’s potentially quite a bit of backtracking for those wanting to travel to other points in Europe.

    Isn't this true about Frankfurt / Munich / Zurich / Vienna ? If LH really cared about geography, they would make Brussels their primary transatlantic hub. Remember as a EU airline, they can make their hub anywhere in the EU, so...

    Re: Italy doesn’t exactly have the best geography as a connecting hub; for example, for transatlantic flights there’s potentially quite a bit of backtracking for those wanting to travel to other points in Europe.

    Isn't this true about Frankfurt / Munich / Zurich / Vienna ? If LH really cared about geography, they would make Brussels their primary transatlantic hub. Remember as a EU airline, they can make their hub anywhere in the EU, so they could build a hub in Dublin as well.

    Just because you care about something doesn't mean LH cares about the same thing.

    1. Tim Dunn Diamond

      Germany is a large and wealthy local market and the LH group all have good connections to markets east of their hubs -far better than BA/IB and AF/KL.
      Italy has neither of those things.
      LH knows what its geography does well but that doesn't mean adding ITA help turn Italy into a hub like exists in Germany, Switzerland or Austria.
      And Brussels has a fair amount of service to Africa.
      None...

      Germany is a large and wealthy local market and the LH group all have good connections to markets east of their hubs -far better than BA/IB and AF/KL.
      Italy has neither of those things.
      LH knows what its geography does well but that doesn't mean adding ITA help turn Italy into a hub like exists in Germany, Switzerland or Austria.
      And Brussels has a fair amount of service to Africa.
      None of the LH hubs are built around trying to serve the Americas to the part of Europe that is west of their hubs although they certainly carry some of that.
      Conversely, AF/KL do connect traffic from the Americas to Germany and southern Europe.
      but most of the US-Italy market will be served nonstop where Alitalia was the leader - although w/ low fares - followed by DL, AA and UA because Italy supports a lot of nonstop, seasonal service from the Americas.

    2. shoeguy Guest

      Alitalia was never the "leader" on US-Italy. The only profitable route AZ had/has was JFK-FCO. As to who is biggest on US Italy, if you look at the seasonal factors, which is where the volume picks up, in summer, it looks like this, including Spring/Summer 22 announced routes:

      Delta
      JFK-FCO (x2), JFK-MXP, JFK-VCE, ATL-FCO, ATL-MXP, ATL-VCE

      American
      JFK-FCO, JFK-MXP, PHL-FCO, DFW-FCO, ORD-FCO, CLT-FCO, PHL-VCE

      United
      EWR-FCO (x 2), EWR-MXP, IAD-FCO, ORD-FCO, ORD-MXP,...

      Alitalia was never the "leader" on US-Italy. The only profitable route AZ had/has was JFK-FCO. As to who is biggest on US Italy, if you look at the seasonal factors, which is where the volume picks up, in summer, it looks like this, including Spring/Summer 22 announced routes:

      Delta
      JFK-FCO (x2), JFK-MXP, JFK-VCE, ATL-FCO, ATL-MXP, ATL-VCE

      American
      JFK-FCO, JFK-MXP, PHL-FCO, DFW-FCO, ORD-FCO, CLT-FCO, PHL-VCE

      United
      EWR-FCO (x 2), EWR-MXP, IAD-FCO, ORD-FCO, ORD-MXP, EWR-VCE, EWR-NAP, EWR-PMO* (announced, never started, due to pandemic).

    3. Tim Dunn Diamond

      Alitalia indeed had the most capacity but they aren't on the scene anymore and ITA is not flying all of the capacity AZ once flew.
      ATL-FCO on DL is double daily this summer and you also forgot BOS-FCO.

  20. Tony Guest

    I was going to use my ITA status (which I got through a status match with KLM) to request an LH status match. Would this news impact that in any way?

  21. Eskimo Guest

    If I remember correctly, Lufthansa tried to buy the last few iterations of the Italian airline, even the last Alitalia. So no real surprise here.

    The real surprise is Lufthansa thinking they can actually save Alitalia. All previous iterations went bankrupt, most people expect the same fate for ITA in a few years.

    1. Matthew Roberts Guest

      The old Alitalia was encumbered with a lot of legacy (union contracts, big liabilities etc.) ITA shed all that in the restructuring when the govt finally realised that nobody was going to invest and the EU said no more state aid. So Lufthansa will be thinking things have changed and it is an opportunity. Who knows, but not sure I would bet on it!

  22. Tim Dunn Diamond

    Ben is right. This investment will not produce any benefits for Lufthansa and will likely cost them.
    ITA is trying to rebrand as Alitalia so they want the connection w/ the past - good, bad and ugly.
    LH can get most of the domestic EU market w/ its own aircraft and its own brands if it wanted to.
    ITA doesn't fix the divided Milan/Rome market split that exists in Italian aviation so...

    Ben is right. This investment will not produce any benefits for Lufthansa and will likely cost them.
    ITA is trying to rebrand as Alitalia so they want the connection w/ the past - good, bad and ugly.
    LH can get most of the domestic EU market w/ its own aircraft and its own brands if it wanted to.
    ITA doesn't fix the divided Milan/Rome market split that exists in Italian aviation so airlines will either work on a point to point basis to outside of Italy or they will compete for flow traffic using international flights from Rome or Milan but not both cities. Alitalia settled on Rome and ITA likely will do the same. Italy is just a poor location for an international hub.
    To the US (the largest international market from Italy), Delta has been the largest airline behind Alitalia for years and that won't change. ITA has to compete in the US market on its own merits and LH won't help. Delta is adding capacity to Italy this summer compared to pre-covid.

    ITA will continue to compete with European low cost carriers which have a larger share of traffic than for any of the other large European markets.

    It says volumes that Delta, which has invested billions in airlines around the world, not only isn't interested in an investment in ITA but neither are DL's partners including AF/KLM which have done joint investments w/ DL.

    And, while Virgin Atlantic is not part of Skyteam, the Delta/Virgin Atlantic/Air France/KLM joint venture is the largest across the Atlantic and will continue to be re: of what ITA does.

    1. Brian Guest

      Star Alliance is currently the largest transatlantic airline alliance. It combines the ASM’s of Lufthansa Group (Lufthansa, Swiss, Austrian, Brussels and Eurowings) with LOT, SAS, Aegean, Croatian with United. The likely addition, if approved, will further grow the ASM’s. If not approved, they would likely remain independent. I do not see a reason for AZ to remain in Skyteam with LH holding a 49% share/vote.

    2. Roland Culé Guest

      LO, SK, A3 and OU (which is Croatia Airlines not Croatian), or TK (not mentioned in your post) aren't in the A++ JV.

      A3 and OU don't fly long haul, in fact OU barely flies full stop.

      You've forgotten about AC who along with UA are part of the JV.

      Looking at how the EC has previously approved JVs it's unlikely they would reject AZ being part of the A++ JV of considering that there is a limited number of overlapping routes that all have other competitors.

    3. Tim Dunn Diamond

      There is no expectation by anyone that Alitalia/ITA will remain in Skyteam.
      The point is that Delta/AF/KL sees no reason to chase any Italian airline esp. since Delta has been the largest non-Italian airline to Italy for years - and Delta is growing its capacity to Italy for 2022.
      The reason why DL/AF/KL undoubtedly didn't want AZ in the joint venture is because AZ had average fares well below DL according to DOT...

      There is no expectation by anyone that Alitalia/ITA will remain in Skyteam.
      The point is that Delta/AF/KL sees no reason to chase any Italian airline esp. since Delta has been the largest non-Italian airline to Italy for years - and Delta is growing its capacity to Italy for 2022.
      The reason why DL/AF/KL undoubtedly didn't want AZ in the joint venture is because AZ had average fares well below DL according to DOT data. AA was the bottom feeder on fares from the US side but AA has recognized that they cannot continue to fly a bunch of seasonal routes and get average fares that are well below their competitors. AZ was the same thing on the European side - well below average fares from the Euro big 3 (BA/IB, AF/KL, and LH group).
      Alitalia was not in the Delta/AF/KL joint venture for years before covid and Virgin Atlantic - which took Alitalia's place - is a much larger transatlantic carrier.

      DOT data shows that the DL/VS/AF/KL joint venture is the largest based on pre-covid and that has remained true during the pandemic.

      and there still is no assurance that LH will add ITA to their transatlantic joint venture for the same reasons that DL didn't want them.

      As noted by others, LH is trying to protect the EU domestic market against ULCC growth and they will probably fail while they also do little to change the transatlantic market to/from Italy.

    4. shoeguy Guest

      Star Alliance is the largest TATL JV, not SkyTeam, which is #2, followed by OW at #3. It doesn't say volumes at all that DL isn't interested in ITA. DL was considering a $150-$160 million investment in the past, but the folks at DL are not crazy and there's really no value to them or DL in investing in AZ/ITA.

      AF/KL invested close to $300 million euro in AZ in 2009 only to get burned and write the whole thing off in 2013.

    5. Tim Dunn Diamond

      again, you don't seem to want to admit that Virgin Atlantic is not in Skyteam so the Virgin Atlantic, Delta, Air France/KLM is not a Skyteam joint venture - but the Delta-led joint venture is the largest transatlantic joint venture based on 2019 capacity and revenue which will continue. Alitalia was not part of the joint venture and United won't want them in the JV so what happens to them won't affect how the JVs...

      again, you don't seem to want to admit that Virgin Atlantic is not in Skyteam so the Virgin Atlantic, Delta, Air France/KLM is not a Skyteam joint venture - but the Delta-led joint venture is the largest transatlantic joint venture based on 2019 capacity and revenue which will continue. Alitalia was not part of the joint venture and United won't want them in the JV so what happens to them won't affect how the JVs are counted.

      And, yes, DL saw what happened to AF a decade ago which is why they aren't repeating it again.

      You can argue if you want but Ben's thesis is correct. There is nothing positive that will happen out of an LH investment and certainly not for the US-Italy market where ITA will still have to compete w/ the US carriers w/o the aid of LH.

  23. John Guest

    All the German efficiency in the world can't make this turkey fly far. This is how the ITA/LH story will pan out: ITA will potter along for a couple of years before a steep terminal decline puts it into bankruptcy. LH board and management will be forced to resign in disgrace for one of the biggest financial write-offs in the company history. Italian unions will protest and hold strikes. Italian public will be angry. We...

    All the German efficiency in the world can't make this turkey fly far. This is how the ITA/LH story will pan out: ITA will potter along for a couple of years before a steep terminal decline puts it into bankruptcy. LH board and management will be forced to resign in disgrace for one of the biggest financial write-offs in the company history. Italian unions will protest and hold strikes. Italian public will be angry. We will roll our eyes because this song is old and familiar by now......

  24. Jim Guest

    Well, RIP SkyTeam, It's been a nice run, but it's a far distant third of alliances at this point.

    A little curious as to when the EU is going to apply all their anti-trust regulations to aviation between Lufthansa and IAG.

    1. tipsyinmadras Gold

      Hardly a death knell for SkyTeam, Alitalia wasn’t really wasn’t a key player in the alliance. AF/KLM is SkyTeam’s key asset in Europe. AZ had already been pushed out of the DL/VS/AF/KLM transatlantic JV.

  25. GRUSA Guest

    Two things bug me with the new ITA Airways. 1) the name seems redundant. 2) the livery is atrocious.

    While I doubt there will be a name change, I’m hoping that if this purchase goes through, Lufthansa will make ITA have a similar livery to the rest of the airlines in the group. You know, the basic white fuselage with some generic lettering and tail design.

  26. shoeguy Guest

    What a lousy investment they are getting themselves into. AZ hadn't produced a profit since 1997. The only commercially viable route in its entire network is between New York and Rome. They're getting a white elephant. Good luck to them.

    1. Max Guest

      ITA is not Alitalia!

      1.) Optimized, brand new Airbus fleet with lots of commonality vs. inefficient, legacy mixed fleet with lots of different models.

      2.) Size of the fleet is smaller and fits the actual demand.

      3.) Workforce right-sized vs. Alitalia which had 40%+ more employees than necessary.

      4.) New labor contracts with wages according to the market vs. old legacy overpayment.

      5.) Pressure from EU authorities in Brussels prevent the continuation of excessive state...

      ITA is not Alitalia!

      1.) Optimized, brand new Airbus fleet with lots of commonality vs. inefficient, legacy mixed fleet with lots of different models.

      2.) Size of the fleet is smaller and fits the actual demand.

      3.) Workforce right-sized vs. Alitalia which had 40%+ more employees than necessary.

      4.) New labor contracts with wages according to the market vs. old legacy overpayment.

      5.) Pressure from EU authorities in Brussels prevent the continuation of excessive state subsidies as before.

      Lufthansa did their homework and are now executing their plan. You can bet that they already had big influence in shaping ITA before.

    2. shoeguy Guest

      ITA is very much AZ, just one third of the size.

      1). Legacy AZ fleet was actually pretty streamlined, around A319/A320 and A330/772. Not new, no, but not that old. ITA is buying new planes with who's money? It's not profitable. The Italian government is doing the buying.

      2). Workforce may be rightsized, but it is still the same union that helped cement AZ's failures. Italian's trade unions remain powerful and if they can...

      ITA is very much AZ, just one third of the size.

      1). Legacy AZ fleet was actually pretty streamlined, around A319/A320 and A330/772. Not new, no, but not that old. ITA is buying new planes with who's money? It's not profitable. The Italian government is doing the buying.

      2). Workforce may be rightsized, but it is still the same union that helped cement AZ's failures. Italian's trade unions remain powerful and if they can sink ITA as much as they helped to doom AZ.

      3). Wages and contracts, all lower value, will just exacerbate the problem. The company lost EUR 170MM in its first three months of operation.

      4). EU can pressure all it wants, but Italy got away with it since 2017.

      Lufthansa has done no homework. It has been at the buffet that is ITA/AZ many times since the mid-2000s. It just doesn't want the Italian market to be ceded to ULCCs that will further eat into the legacy airline model in Europe. It also wants to box out IAG. LH does have experience and success in turning around failing airlines, to some extent, with LX being the most obvious). The verdict still out on OS, Brussels Airlines, and the Eurowings model, whatever that is.

      The biggest loser here in this is Delta, which won't have a partner in Italy presumably and will have to rely on its own metal to fly even more between the US and Italy and flow the rest through CDG and AMS.

    3. Max Guest

      1.) Alitalia also had some Embraer Jets, the A319/A320 fleet was inconsistent with different engine options. 777-200 simply outdated with high fuel burn and the wrong size for Alitalia's operation. Mixed A320neo/A330neo/A350 fleet is much better as you can rotate pilots between all aircraft easily.

      2.) ITA has gotten rid of all the older people on payroll that did not contribute to the company anymore but were 'protected' because Alitalia was a de facto state...

      1.) Alitalia also had some Embraer Jets, the A319/A320 fleet was inconsistent with different engine options. 777-200 simply outdated with high fuel burn and the wrong size for Alitalia's operation. Mixed A320neo/A330neo/A350 fleet is much better as you can rotate pilots between all aircraft easily.

      2.) ITA has gotten rid of all the older people on payroll that did not contribute to the company anymore but were 'protected' because Alitalia was a de facto state company.

      3.) These 3 months don't matter that much. It's the ramp-up phase and Europe also still has pretty strict Wuhan-Flu restrictions that decrease demand drastically.

      4.) Before no one really cared, however now Lufthansa has lobbied the German government (which is quite influential in Brussels) to dictate the conditions for state help to ITA. Essentially Lufthansa presented a wish list and ITA was formed accordingly.

      5.) The disruptions due to the political handling of the Wuhan-Flu in Europe have now presented a unique opportunity. Lufthansa knew exactly why they backed off from buying Alitalia before but did so now with ITA.

      6.) Swiss was a big success, Brussels is a failure. While not being liked by passengers and also not bringing in remarkable profits, Eurowings was successful in preventing Easyjet and Ryanair from getting a foot into the German market. Both have significantly reduced their presence over the last years instead of expanding like they had planned to.

    4. shoeguy Guest

      If you're so moved, invest in ITA/AZ and let us know how it all works out.

      Wuhan Flu? Racist.

    5. Matt Guest

      I disagree that Eurowings was successful in preventing LCCs by design. German protectionism was successful in fending of the LCCs. FRA was slot capacity protected for years (like LHR but that has credible competition from LGW and STN). Yes U2 had an opportunity in Berlin when AB went bankrupt, but Berlin isn't the key airport and it already had lots of competition from Ryanair.

      Then in the pandemic LH got a massive state bailout...

      I disagree that Eurowings was successful in preventing LCCs by design. German protectionism was successful in fending of the LCCs. FRA was slot capacity protected for years (like LHR but that has credible competition from LGW and STN). Yes U2 had an opportunity in Berlin when AB went bankrupt, but Berlin isn't the key airport and it already had lots of competition from Ryanair.

      Then in the pandemic LH got a massive state bailout to allow them to keep fares low and dominate routes. Their state aid penalties of slot giveaways were tiny. U2 and FR had no option but to reduce because they weren't playing on a level playing field and allocate their resources to best returns.

      Same reason why the Middle East carriers are not big in Germany, protectionism.

    6. Max Guest

      It was not about FRA and MUC were Lufthansa themselves is strong anyway. It was mainly about protecting the decentral airports such as DUS (Dusseldorf) were Ryanair with their subsidy Laudamotion was defeated.
      Of course Lufthansa's extensive lobbying of the German government also had a stake in accomplishing that.

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red_robbo Member

I hope Lufthansa got a copy of "Dealing with Italian unions for Dummies" for Christmas. Why don't they just dig a big hole in the ground, put €500m cash in it and set it on fire? Utter madness. It will all end in tears.

2
Klaus Guest

@Ben: Air Dolomiti also operates flights for Lufthansa from Munich to Leipzig/Prag/Geneva/Bale etc. So saying that they offer connectivity in Italy is simply wrong. The only two domestic flights are from Verona to Sardinia (AHO, TTB). Air Dolomiti is more like Lufthansa Cityline (or American Eagle or United Express). The idea of ITA is to connect North America via Rome with Africa. It would be Lufthansa’s second Africa Hub - the other one being Brussels.

1
guisun Gold

Wait, where did they get the money to invest when they got money for Covid bailout?

1
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