Deutsche Lufthansa AG said it aims to buy a minority stake in ITA Airways, seeking to advance an industry consolidation that would give the German airline a stronger foothold in a major European aviation market.
The German carrier didn’t disclose financial details, or lay out the size of the stake it wishes to buy in the successor of Alitalia . Lufthansa wants to buy 40% of ITA in an initial step and subject to negotiations.
The airline said in a statement that it submitted a bid to Italy’s Economy and Finance Ministry, with a view to buying the remaining shares “at a later date.” Further talks will primarily focus on the form of a possible equity investment, the commercial and operational integration of ITA into Lufthansa, the airline said.
A deal would allow Lufthansa to expand in one of Europe’s key markets, while charting a course for Rome to rid itself of an asset that has soaked up billions of euros in state support. While ITA and erstwhile Alitalia have been unprofitable, Lufthansa would gain access to lucrative trans-Atlantic travel while preventing a rival from building up a base in northern Italy that might soak up passengers from Lufthansa’s own Munich hub.
“The offer from Lufthansa was widely expected, but in our view sends a sub-optimal message on capital allocation: yes, Italy is an important, attractive market – but the successful restructuring of ITA into a sustainably profitable airline is far from assured,” Bernstein analysts Alex Irving and Clementine Flinois said in a note.
ITA would add to a group of national carriers already under the Lufthansa umbrella, including Swiss and Austrian Airlines. Lufthansa Chief Executive Officer Carsten Spohr, a trained pilot who has run the company for close to a decade, has built the company into Europe’s biggest airline group, competing with the other two major conglomerates — British Airways parent IAG SA and Air France-KLM — as well as the trio of budget specialists: Ryanair Holdings Plc, EasyJet Plc and Wizz Air Holdings Plc.
The planned purchase removes one more independent player from the European landscape, leaving Portugal’s state-owned airline TAP SA and Nordic carrier SAS SA as possible takeover targets. ITA had previously been at the center of a multi-company bidding contest that at one time involved MSC Mediterranean Shipping Co., Delta Air Lines Inc., Air France-KLM and private equity firm Certares Management LLC.