Will Lufthansa Buy A Stake In Italy’s ITA Airways?

Italy has been attempting to privatize its national carrier for a long time. When Alitalia existed, this was the case with the new version of the airline. Lufthansa is interested in buying a stake in the company. This could be very close to being a reality.

Lufthansa wants to invest in ITA Airways

Some companies are interested in investing in the airline. A number of proposals have been made over the past year, including a joint investment from Air France-KLM and Delta Air Lines.

There is a chance that we could see a 40% stake in ITA Airways being bought by Lufthansa for 230-240 million.

We know that other companies are not interested in investing in ITA Airways. Air France-KLM can't invest in an airline until it pays back the government support it received during the Pandemic. The group is no longer in the running to invest in the airline.

The current proposal is a bit more modest than previous ones, both in terms of the stake and valuation of the airline. The idea is to start with a minority stake and then increase it over time, as shown in the picture.

It is not clear how this will play out, though I would assume that the airline would be part of the Lufthansa Group.

I don't know what to think of this, but Klaus notes an interesting observation. The airline is selling flights on its website. I assume it is a glitch, but I also think it is not a coincidence.

What’s Lufthansa’s motive for investing in ITA?

Why would the German airline invest in the airline? It is hard to imagine that this airline will be profitable, as it has already lost hundreds of millions of dollars and has no signs of improvement. Italy is the second largest international market for Lufthansa after the US.

This wouldn't be the first airline that Lufthansa invested in. Air Dolomiti is a small, regional carrier that is owned by Lufthansa. From major hubs in Germany to Italy, it doesn't give Lufthansa a lot.

In Italy, the biggest challenge has been competing with Skyteam. The SkyTeam alliance has Alitalia as a member. It would be difficult for Lufthansa to grow beyond its current position if it collaborated with other airlines.

If Lufthansa invested in ITA Airways, it would most likely be to try to get more market share in Italy from competitors. It is not known if the Star Alliance joint venture will be approved by regulators.

I don’t see this ending well

I think there is value in partnering with a major airline in Italy. There were rumors that Lufthansa was going to invest in Alitalia.

I don't think this will work out the way they hope. Problems that existed at Alitalia are still present at ITA Airways.

• Lufthansa would be partnering with the Italian government, which didn’t have a great track record of running Alitalia successfully
• In fairness, it at least seems smarter (from Lufthansa’s perspective) that Lufthansa would have control of day-to-day operations at ITA, rather than the Italian government
• While ITA Airways is much smaller than Alitalia, over time it’s likely that the airline will become bloated and inefficient, like Alitalia was, including having labor issues
• The Italian short haul market is brutal, given the amount of competition, especially from ultra low cost carriers
• Italy is a more leisure-oriented destination than Germany and the United Kingdom, for example, so the seasonality can make long haul flying out of Italy tricky
• Italy doesn’t exactly have the best geography as a connecting hub; for example, for transatlantic flights there’s potentially quite a bit of backtracking for those wanting to travel to other points in Europe

I want to know how this plays out. I think it shows how many airlines and companies are interested in investing in Alitalia and ITA Airways. I am curious to know what the future holds for Air Dolomiti if it is invested in.

Bottom line

In order to increase its market share in Italy, Lufthansa has been interested in investing in ITA Airways. The current plan seems to be for Lufthansa to initially buy a 40% stake in the airline and then grow that over time.

Italy is a huge market for the German airline group and partnering with Italy's national airline would allow them to grow their market share. Is it possible that Lufthansa can do so well?

What do you think about the investment by the group in the airline?