A last-minute deal between the Italian Minister for Economy and Finance and executives from Lufthansa has brought merger talks between the German airline group and Italian flag carrier ITA Airways back on track.
In an agreement reached between the parties in 2023 and cleared by the European Commission in 2024, the German airline is set to acquire a 100% stake in ITA Airways from the Italian Ministry of Economy and Finance through two investments of €325 million ($358 million), with Lufthansa seeking to increase its stake to 100% in a final phase by 2033 amounting to a total investment of €829 million ($912 million).
However, on November 7, 2024, AeroTime reported that the talks between the parties had stalled over a request made by Lufthansa for a reduction in the purchase price of the Rome-based carrier. According to sources close to the ongoing negotiation process, the talks hit an obstacle in the form of a request made by Lufthansa executives for a reduction of around €10 million ($11 million) in the second tranche of the payment due to be made to ITA Airways shareholders.
According to reports, the Italian Minister of Economy and Finance, Giancarlo Giorgetti held an urgent meeting with Lufthansa’s CEO Carsten Spohr on the evening of November 11, 2024 (the final day before an EU deadline to confirm the deal was still on) to break the deadlock and save the agreement from potential collapse.
It now seems that those last-minute discussions were successful. The Italian government and Lufthansa said that they had reached a deal on the sale of a stake in flag carrier ITA Airways to the German airline late on November 11, 2024, which would allow the parties to present the mutually acceptable agreement to European regulators by the midnight deadline. The deal now needs to be cleared by the European Commission, the EU’s antitrust regulator, to ensure fair competition.
Italian media reported that Lufthansa’s request for a €10 million ($11 million) discount on the second tranche of €325 million had been refused by the government and had led to a halt in negotiations, threatening the whole deal. Lufthansa first bought a 41% stake in ITA Airways in May 2023 (also for €325 million), with the right to increase its stake to 100 percent in the medium term. The second tranche which was at the center of the issue was worth 49%.
On November 12, 2024, Giorgetti confirmed that the additional 49% second-stage stake would be sold for the same price. “The economic conditions envisaged have not changed with respect to the agreement already signed,” his office said in a statement, referring to the first deal.
It was also revealed that Giorgetti also capitulated to the European Commission’s demands on several other points that would ensure competition is maintained in the European market post-merger.
These included allowing one or two rival carriers to commence non-stop flights between Rome and Milan and certain other Central European airports in direct competition, improving the competitive conditions on certain transatlantic routes where Lufthansa and its Star Alliance partners Air Canada and United Airlines are dominant, and lastly to surrender a bank of slots at Milan-Linate Airport (LIN) to other carriers.
With the talks resumed and the deal back on track, Lufthansa Group will continue to work with their counterparts at ITA Airways to work on ways the carriers can begin to cooperate on operational aspects of their respective businesses.