Lufthansa is about to buy shares of Italy’s ITA Airways

German airline giant Lufthansa submitted a new offer on Wednesday to Italy’s struggling ITA Airways, bringing the turbulent takeover process closer to the finish line.

Lufthansa’s proposal would see the original carrier lose a minority shares in the state-owned ITA, with the option to “purchase the remaining shares at a later date,” it said in a statement.

No financial details were disclosed, but Bloomberg News reported earlier that the deal could see Lufthansa pay up to 350 million euros ($375 million) for an initial 40% stake before raising ownership rate up to 100%.

Italy’s economy ministry confirmed on Wednesday that it had received a letter expressing its intention to buy a minority stake in Lufthansa’s ITA, saying it “has the right to check the fairness of the offer”.

“No other offers have been received by the deadline of 6pm today,” it said in a brief statement.

Italy’s predecessor government kicked off the process of selling off a majority stake in ITA Airways last year, the successor to iconic but loss-making national carrier Alitalia.

The government, under then-prime minister Mario Draghi, at first prioritized the bids of US hedge fund Certares, Air France-KLM and Delta Air Lines.

But when those talks failed to make progress, Italy’s new right-wing cabinet under Prime Minister Giorgia Meloni announced in late October that the exclusive negotiating period was over — putting Lufthansa back into action. .

important market

The German group – which also owns Swiss, Brussels and Austria Airlines – has always made it clear that it is interested in a “real privatization” of ITA Airways.

Swiss shipping giant MSC partnered with Lufthansa in the first round of bidding but said in November that it would pull out, leaving Lufthansa to pursue the deal alone.

Separately, Air France-KLM said on Wednesday it had informed the Italian government that it would also withdraw from the race, clearing the way for rival Lufthansa as sole bidder.

Lufthansa hopes to make Rome an important European travel hub, including offering direct flights to Italy from the United States, its largest market.

“For the Lufthansa Group, Italy is the most important market outside of its home market and the US,” the company said.

“Italy’s importance to both business and private tourism lies in its strong export-oriented economy and status as one of Europe’s leading holiday destinations.”

‘Avoid past mistakes’

ITA Airways replaced national carrier Alitalia, which was placed under state control in 2017 after years of fruitless efforts to find a buyer.

The Italian state has spent more than 13 billion euros trying to get the airline back up and running over the past two decades.

The Italian government at the end of last year agreed to inject an additional 400 million euros into the ITA to keep it afloat as the bidding process drags on.

ITA announced an operating loss of 170 million euros for 2022.

This year, ITA will receive 39 new aircraft, including 9 long-haul aircraft.

The company’s CEO Fabio Lazzerini said half of its fleet will be “new generation” by the end of 2023.

However, without a partner to bolster its long-distance business, the ITA is seen as having little chance of surviving stiff competition from low-cost companies.

Andrea Giuricin, a transport economist at Milan’s Bicocca University, wrote on Twitter: “Real privatization is needed to avoid the mistakes of the past.

“It is important to understand who will have control after a partial privatization. If in Alitalia’s case politics is always the deciding factor, then it will be another Italian privatization process. ,” he wrote.

In Frankfurt, shares of Lufthansa rose 5.17% to close at 9.26 euros on Wednesday.

© 2023 AFP