Merger talks between Lufthansa and Italian airline ITA Airways are reported to have 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 have 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 will hold an urgent meeting with Lufthansa’s CEO Carsten Spohr in the coming days in an attempt to break the deadlock and save the agreement from potential collapse.
In the agreement reached between the parties in 2023 and cleared by the European Commission in 2024, the German airline is set to acquire a 41% stake in ITA Airways from the Italian Minister of Economy and Finance, through a €325 million ($358 million) capital increase, with Lufthansa seeking to increase its stake to 100% in a second phase by 2033 amounting to a total investment of €829 million ($912 million).
However, the deal was put on hold during talks held on November 4, 2024, between the German carrier and Italian government officials. The Italian Ministry of Economy and Finance oversaw the launch of ITA Airways following the closing down of its predecessor Alitalia in 2021.
The German group had been seeking the reduction of around €10 million on the second tranche of just over half a billion euros. Sources said Lufthansa justified the request by referring to the cost of some investments it made following the takeover agreement signed in 2023. However, officials from the Italian Minister of Economy and Finance say that as ITA’s economic situation has improved since the deal was signed, no such reduction should be payable to Lufthansa.
There is very little time left for the current impasse to be resolved, as the European Commission has set a deadline of November 11, 2024, as the cut-off for the submission of all papers relating to the takeover for consideration. Therefore, time is of the essence for both carriers, hence the sense of urgency in finding a mutually agreeable resolution in short order.
According to sources close to the matter, trust between the two parties has been “significantly compromised,” leaving the talks close to collapse. According to Giorgetti, the stalemate should not have occurred – a sign of a crisis of confidence “that damages relations more than any other element,” he added.