Germany's Lufthansa to take over 41% stake in Italy's ITA Airways

German airline Lufthansa has agreed to take over a minority stake in the Italian airline ITA Airways, both airlines announced at the signing of the contract in Rome on Thursday.

ITA was formed in 2020 after a restructuring of the failed carrier Alitalia, which the government in Rome took over in March of the same year when various takeover bids failed.

After months of negotiations, the German MDax-listed Lufthansa Group has agreed with the Italian state to take over a minority stake of 41% in ITA by way of a capital increase, Lufthansa said in an ad hoc release on Thursday.

For this purpose, ITA is to receive €325 million ($348.37 million) in equity from Lufthansa cash funds. The Italian state has also undertaken to contribute a further €250 million to the company.

Options have also been agreed that will enable Lufthansa to take over the remaining shares in ITA at a later date.

The purchase price will depend on the business development of ITA Airways, the company announced.

Contracts are to be concluded "shortly." Italian media reported on Monday that the state could hold a small stake of 5% to 10% for a while longer so that it could continue to receive important first-hand information and exert influence.

Earlier media reports had said the German airline plans to pay between €320 million and €330 million for the stake.

Once ITA Airways begins to make profit again, the reports said Lufthansa may then invest a further €500 million to acquire 50% to 55% of its shares, which would be a majority stake.

The Italian state would thus remain a shareholder for the time being, in contrast to Lufthansa's initial plans.

The deal is subject to competition law reviews at both a national and European level.

EU competition authorities are expected to pay particular attention to whether a monopoly situation is created at the airports in Rome and Milan.

After the antitrust review, the partial takeover could be completed as early as this summer.

While Italia Trasporto Aereo (ITA) took over the flight operations of its insolvent predecessor Alitalia in October 2021, it is not its legal successor.

ITA has, however, secured take-off and landing rights as well as the Alitalia brand. The legendary name could possibly soon be reactivated under the new corporate umbrella.

Lufthansa strategy chief Jörg Eberhart, who already headed the regional subsidiary Air Dolomiti operating in northern Italy, is being discussed as the new head of ITA.

Last year ITA made a loss of €486 million on a turnover of just under €1.6 billion. At the end of March, the company cited the aftermath of the coronavirus pandemic, increased fuel costs due to the Ukraine war and the poor euro-dollar exchange rate as the reasons for the figures in the red.

According to the Italian Finance Ministry, ITA currently has 71 aircraft and is expected to increase sales to €2.5 billion this year.

The target for 2027 is now 94 aircraft and a turnover of €4.1 billion.

Decimated by the pandemic-related downturn in business, the number of employees is projected to increase from 4,300 to more than 5,500.

Lufthansa chief executive Carsten Spohr spoke of a win-win situation for Italy, ITA and his company. He wants to bring the lean Alitalia successor with its young fleet into the profit zone via higher load factors, cheaper purchasing and better flight coordination.

He said: "As part of the Lufthansa Group family, ITA can develop into a sustainable and profitable airline that connects Italy with Europe and the world."

Lufthansa has wanted to gain a foothold in its second most important foreign market for many years. They launched an attempt in 2009 under the name Lufthansa Italia which failed in 2011.

At present, the Lufthansa Group only attracts transfer passengers from rich northern Italy to the Munich hub with flights operated by Air Dolomiti. Now, with ITA, Lufthansa is acquiring market share in an environment dominated by non-domestic low-cost carriers such as Ryanair and Easyjet.

Deutsche Lufthansa AG has already taken over the former state-owned airlines of neighbouring Switzerland, Austria and Belgium and has continued to operate them as independent brands.

The Belgian Sabena successor Brussels Airlines was taken over by Lufthansa in two stages, initially also starting with a minority stake.

Lufthansa are also looking to possibly take over Portugal's TAP.