On Thursday, the German airline Lufthansa inked an agreement with the Italian government for a minority share of 41 percent in the long-struggling carrier ITA Airways, which was once known as Alitalia. The agreement asks for investments totaling 575 million euros to be made in capital increases; Lufthansa will contribute 325 million euros, and the remainder will come from the Italian Ministry of Finance. These funds will serve as growth capital. In addition, Lufthansa will be given the opportunity to buy the company’s remaining shares at a later time.
According to a statement released by the Italian Ministry of Finance, Lufthansa’s industrial strategy for the Italian carrier forecasts annual sales of 2.5 billion euros ($2.68 billion) in the current year, with those figures increasing to 4.1 billion euros in 2027. During that time period, Lufthansa intends to increase the number of workers working for ITA from the present 4,000 to 5,500 and to increase the size of the fleet from 71 to 94 aircraft.
When the transaction is finalized, ITA Airways will become the sixth airline owned by the Lufthansa Group. As part of the plan, the Fiumicino airport in Rome will be integrated into the Lufthansa Group’s network of hubs, while the focus of ITA Airways would shift to longer-haul routes. The Chief Executive Officer of Lufthansa, Carsten Spohr, stated that Milan, the economic and financial centre of Italy, has room for expansion.
The transaction is subject to the approval of the competition authorities in the EU. ITA made its official debut in October 2021, shortly after the defunct flag carrier Alitalia completed its last flight. This marked the end of a 74-year run for Alitalia, the latter years of which were marked by increasing financial instability and eventual bankruptcy.
In the most recent round of tendering, which took place early this year, Lufthansa was the sole airline to submit an offer. The German airline has ranked Italy as its third most important market, behind Germany and the United States, noting the country’s extensive network of commercial links and robust export economy, in addition to the country’s attractiveness as a tourist destination.
ITA Airways and its predecessor, Alitalia, have been looking for an industrial partner for a very long time. This is because the Italian airline has been losing business on domestic and European flights to low-cost carriers. Over the course of the previous 15 years, a number of business transactions with prospective and actual partners had all been unsuccessful. Air Dolomiti is already a subsidiary of the German airline and is located in northern Italy. It is responsible for directing long-distance traffic from towns in northern Italy such as Milan, Verona, and Venice to connections in Munich and Frankfurt.
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