Germany’s Lufthansa Group has won EU approval to take a major stake in Italian flag carrier ITA Airways after making concessions to allay concerns from European antitrust regulators who feared that the deal could damage competition on key short and long-haul routes.
Announcing its decision on Wednesday, the European Commission said that without the deal, ITA Airways’ future remained uncertain, although in recent weeks, the Commission had pushed Lufthansa to the brink of nearly abandoning the deal.
Under the terms of the €325 deal, Lufthansa will initially acquire a 41% stake in ITA Airways, with the Italian government retaining the remaining 59% stake in the Milan-based airline.
In order to secure the deal, Lufthansa has agreed to a number of ‘remedies’ to address competition concerns on short-haul flights to Central Europe and long-haul routes between Italy and the United States, and Canada.
To address short-haul competition concerns, Lufthansa will have to release slots from Rome and Milan to one or two rival airlines to operate non-stop flights to destinations of their choosing in Central Europe.
For long-haul routes, Lufthansa won’t be required to give up slots, but it will be required to enter into agreements with rival carriers to increase competition.
Explaining its decision not to push Lufthansa any further on its long-haul network to North America, the EU said that it took into account that the Italian government would retain a controlling stake in ITA Airways and, therefore, the airline would be incentivised to continue competing with other Lufthansa carriers.
Lufthansa is one of Europe’s biggest airline groups, and it has a major presence in several European countries, including Austria, Belgium, and Switzerland. The airline group has also expanded across the continent with its Eurowings brand, although Lufthansa has traditionally been weak in Southern Europe.
The ITA Airways deal will allow Lufthansa to expand its presence in Southern Europe and compete on key long-haul routes.
European regulators had a July 4 deadline to make a final determination on Lufthansa’s bid for a stake in ITA Airways.
