Lufthansa is preparing to make additional concessions to the European Commission to secure European Union approval for its planned investment in Italy’s state-owned ITA Airways, according to a report published by the Politico website.
This latest maneuvering by the German flag carrier is being seen as a way to diffuse growing tensions over the deal that could be facing an EU veto – a move that the Deputy Prime Minister of Italy, Matteo Salvini, has described as a “serious attack on Italy, a hostile act,” in comments he allegedly made to news agency ANSA earlier in June 2024.
According to sources close to the negotiations, EU officials and the airlines involved have been focusing their attention on an apparent lack of competition on long-haul routes between Italy and Germany to North America where regulators do not believe there is adequate competition from other airlines. However, the sources state that Lufthansa has committed to tackling this issue by keeping part of ITA’s business separate for two years. The Commission has asked for a 10-year pledge, according to the sources.
The negotiations are also focusing on how Lufthansa might ringfence its revenue share from the carrier’s joint venture with United Airlines, with whom it currently aligns on price, capacity, and scheduling on transatlantic routes. The new offer (of separating ITA transatlantic routes) is being seen as the last attempt to answer the Commission’s various concerns over the issue, although the sources told Politico that hopes were not running high for a deal being approved, with one saying that they were “not too optimistic” at this stage of the talks, as they had now “become political.”
Italy has been lobbying the European Commission extensively for the deal to be approved in short order. In September 2023, Italian Prime Minister Giorgia Meloni said that the Commission was “blocking the solution” her government had put forward, a matter that she said had been “brought to the attention” of European Economy Commissioner Paolo Gentiloni who is Italian.
Equally, Lufthansa CEO Carsten Spohr has been pushing hard to get the deal approved, pointing out that many industry analysts believe that ITA Airways will not survive in the long run without a deal being given the green light. However, Margrethe Vestager, the EU’s Commissioner for Competition said that the deal will not be approved unless the “serious competition issues cannot be resolved.”
Lufthansa has become one of Europe’s biggest airline groups in terms of revenue following its purchase of Brussels Airlines, Austrian Airlines, and SWISS. Since these deals were approved, however, the European Commission has lowered its tolerance of deals between airlines.
Where once offloading valuable airport slots was often seen to be the easy way around anti-competition concerns, the dynamics of the airline marketplace where airlines are more cautious in their expansion plans (particularly post-pandemic) means that airport slots do not hold as much value as they once might have.