On 16 June 2023, in the early hours of the European morning, Italy's national court of auditors approved Lufthansa Group's proposed acquisition of 41% of ITA Airways.

The Italian Ministry of Finance, which previously maintained complete ownership of the airline, finalized the details of the transaction last month. Eventually, the German aviation conglomerate will be able to purchase a majority stake in the successor to Alitalia.

ITA Airways
Photo: Vincenzo Pace | Simple Flying

After weeks of thorough investigation, an Italian court of experts has officially approved Lufthansa's purchase price of €325 million for the shares.

Although the group will not hold a majority stake in the Italian carrier, at least not initially, it is widely believed that the airline will be able to maintain a strong influence over business decisions and fully incorporate ITA's routes into Lufthansa's existing global network.

What's next for the merger?

Despite gaining clearance from Italian financial regulators, a few key hurdles remain before the acquisition can be fully executed. While financial authorities have approved the agreement, questions of fair competition have emerged and remain to be adequately assuaged.

First, Italian and German competition watchdog authorities will analyze the merger deeply to determine whether the purchase will violate antitrust regulations. Considering the level of corporate consolidation within the European aviation industry in the past few years, many fear an even larger Lufthansa Group will prevent fair competition within the market.

ITA Airways AirbusA320-200
Photo: InsectWorld | Shutterstock

The most significant concern, notably, involves the large number of landing slots that ITA Airways currently holds at Milan Linate Airport and Rome's Fiumicino Airport.

While it would be unproblematic for a state-owned flag carrier to maintain a strong presence at two of a nation's largest airports, a global conglomerate aiming to use those slots for its own advantage (specifically to feed travelers into Lufthansa's German hubs) could prove problematic.

After Italian and German regulators approve the merger from a competitive perspective, one final hurdle will remain before the acquisition can be completed. The EU Commission will need to give final approval to ensure that ITA's entry into Lufthansa Group will not cause significant issues to the competitive landscape in European aviation.

An ITA Airways Airbus A330-200 departing from Milan Malpensa
Photo: Davide Calabresi | Shutterstock

Many believe the commission will not challenge the merger, considering it approved the International Airline Group's acquisition of Air Europa earlier this year.

The EU authority will likely approve the merger, but with some conditions to counteract Lufthansa's anticompetitive stance, such as requiring ITA to relinquish several slots at both airports of concern.

Challenges once the merger is approved

Even once authorities have given the acquisition the green light, some challenges will likely remain. First, regulators may prevent the German conglomerate from acquiring a majority stake in the airline. However, the EU Commission did not do so when Lufthansa Group purchased the remainder of Brussels Airlines after a smaller initial purchase.

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Additionally, SkyTeam, which ITA currently maintains membership in, may lead the airline through a lengthy and costly exit process. Eventually, Lufthansa Group will hope for ITA to join its Star Alliance.

Ultimately, regulators will determine how drastically the merger between the young Italian flag carrier and the traditional German juggernaut will change the face of European aviation.

Source: FFH Radio