Lufthansa & ITA Airways Take A Step Further In Merger As EU Approves Necessary Remedies

The European Commission has given the final green light needed for the ITA Airways– Lufthansa merger, agreeing to the sacrifices put forward by the two companies. These remedies serve to satisfy competition-related concerns initially brought up by Brussels, which was worried about monopolies in specific markets.

easyJet will expand its short-haul network in Italy, opening up two new bases in Milan Linate Airport and Rome Fiumicino Airport as of the upcoming spring season. Meanwhile, on the intercontinental side that mainly relates to North America flights, Air France-KLM and the International Airlines Group (which owns British Airways, Aer Lingus and Iberia among others), will step in to facilitate intercontinental connections from Italy.

The Commission’s concerns

Brussels had initially noted concerns with the following three areas:

1. Short-haul routes: ITA and Lufthansa would have a monopoly on certain flights between Rome or Milan and airports in Central Europe – including the group hubs in Germany and Austria for example.
2. Long-haul routes: Lufthansa and ITA would also have a monopoly on flights to several destinations in North America.
3. Milan Linate Airport: the valuable slots at Milan’s central, overcrowded airport, would also be largely taken up by the new, merged company. Instead, the European Commission wanted the two parties to relinquish some to a competitor.

A summary of the latest agreement is shown below.

The Commission says that the three remedy airlines represented:

• Independence from Lufthansa, the Italian Ministry of Finance and Economy, and ITA Airways
• “Financial resources, proven expertise and incentives to act as viable and active competitive forces in competition with Lufthansa and ITA”
• An absence of competition issues or a lengthy implementation process

Air France-KLM & the International Airlines Group

Neither of the two groups are expected to start a non-stop route between Italy and North America, even if Air France-KLM for instance has previously indicated its intention to fly between Milan and New York. Instead, the European Commission has said that the ITA-Lufthansa long-haul route dilemma can be solved by ensuring competitiveness through another competitor by signing codeshare agreements to relinquish slots. Specifically, Brussels said:

“Lufthansa and the MEF had to enter into agreements with rivals to improve their competitiveness on the long-haul routes of concern between Italy and North America, for instance through interlining agreements or slot swaps. This would lead to increased frequencies of non-stop flights and/or improved connections for one-stop flights on each of the routes.”

It is unclear what exactly the agreement will look like. Air France-KLM and IAG have yet to release a statement on the latest news.

easyJet to open new bases in Italy

easyJet will open two brand new bases in Italy, namely at Rome’s Fiumicino Airport (FCO) and the valuable Milan Linate Airport (LIN). Eight aircraft will be based across the two airports, making Italy the company’s second-largest market with more than 21 million customers annually, it said in a statement. Kenton Jarvis, easyJet CFO and incoming CEO, commented:

“We are pleased to be approved as the short-haul remedy taker in Milan and Rome. This will ensure the Italian market remains competitive, with easyJet now able to offer a wider choice of destinations and low fares for Italian consumers, with those flying to and from Linate and Rome benefiting from new services from spring onwards. This move also confirms the airline’s key role in the Italian market providing the opportunity for continued investment, additional jobs and growth.”

This is great news for easyJet as it solidifes its position in the Italian market. In terms of number of flights and seats to and from Italy for November 2024, the leaderboard looks as follows per Cirium data.

• Ryanair: 23,500 two-way flights, offering 4.5 million seats
• ITA Airways: 10,300 flights, 1.7 million seats
• easyJet: 6,400 flights, 1.2 million seats
• Wizz Air: 5,600 flights, 1.3 million seats

Note that while Wizz Air offers fewer flights compared to easyJet, seat numbers are higher as larger aircraft are deployed on Italian services (Airbus A321s, for example). By opening up two new bases, easyJet will reinforce its position as the overall third largest, as well as the second-largest low-cost company in the market.

ITA Statement

In a statement, ITA Airways said that it “welcomes” the green light from the European Commission for the “transaction involving the transfer of the stake” of ITA from the MEF, to Lufthansa.

The Lufthansa-ITA Airways merger first came to light in November 2023, when the two parties informed the European Commission of the acquisition of 41% of the Italian national airline by the German airline group. The remaining 59% would be acquired further down the line.

The first approval was granted in July 2024, when the Commission agreed to the deal as a whole, while noting that competition concerns would need to be satisfied before Lufthansa fully goes ahead with the purchase. Things got a little bit tense between Lufthansa and the MEF, over a dispute on the price of the acquisiton in early-November. An agreement was found, and the package of remedies that they proposed was sent to teh Commission.