The European Commission has approved today the proposed acquisition of joint control of ITA Airways (´ITA´) by Deutsche Lufthansa AG (´Lufthansa´) and the Italian Ministry of Economy and Finance (´MEF´).

The decision comes after a thorough investigation into the proposed transaction, including the issuance of a Statement of Objections. Lufthansa and ITA have extensive route networks from their hubs in Austria, Belgium, Germany, Switzerland, and Italy. Their networks largely complement each other, as Lufthansa and ITA operate from different hubs in Central Europe and Italy, respectively. Likewise, Lufthansa also has joint ventures with United Airlines and Air Canada for transatlantic routes, and with All Nippon Airways for routes to Japan. Ç

The agreement, announced in May 2023, will imply that Lufthansa Group gains an initial 41% stake in ITA Airways for 325 million euros, with options to acquire the remaining shares from 2025. ITA will also become part of the group’s Miles & More loyalty program and will be able to leverage the group’s capacity for aircraft and fuel purchasing,

• Commission´s concerns and subsequent investigation

The Commission carried out an in-depth investigation in which an extensive information and feedback from market participants and other stakeholders were gathered, including from rival airlines, airports, business customers, consumer and passenger associations, as well as from individual consumers who reached out to the Commission.

The Commission expressed its concerns during the market investigation, which are as follows:

• Reduced competition on a certain number of short-haul routes connecting Italy with countries in Central Europe through non-stop and one-stop flights. On such routes: (i) Lufthansa and ITA compete head-to-head or would have likely competed head-to-head soon; and (ii) competition is limited and comes primarily from low-cost carriers, such as Ryanair, who in many cases operate from more remote airports.
• Reduced competition on a limited number of long-haul routes between Italy and the US and Canada. Given that Lufthansa and its joint venture partners United Airlines and Air Canada coordinate on price, capacity, and scheduling, and share revenues, the Commission treats the activities of ITA, Lufthansa and its joint venture partners as those of a single entity when assessing this transaction. ITA and Lufthansa’s joint venture partners compete head-to-head with non-stop flights on these routes and competition from other airlines is limited.

• Created or strengthened ITA’s dominant position at the Milan-Linate airport, which could have made it harder for rivals to provide passenger air transport services from and to Milan-Linate.

Lufthansa and the MEF submitted the following package of remedies to address the Commission´s competition concerns:

• Commitments for short-haul routes: Lufthansa and the MEF will provide one or two rival airlines with the necessary assets to initiate non-stop flights between Rome or Milan and specific airports in Central Europe. These competitors must operate these routes for a defined minimum period. Additionally, Lufthansa and the MEF will ensure that one of these rival airlines can access ITA’s domestic network, allowing them to offer indirect connections between certain Central European airports and other Italian cities besides Rome and Milan.
• Commitments for Long-Haul Routes: The merged entity will form agreements with competitors to enhance their competitiveness on the long-haul routes of concern, such as through interlining agreements or slot swaps. This will increase the frequency of non-stop flights and/or improve connections for one-stop flights on these routes.

The Commission’s assessment took into account that the MEF will retain a controlling stake in ITA after the transaction, maintaining an incentive for ITA to compete against Lufthansa’s joint venture partners in North America until ITA integrates into the joint venture.

• Commitments for Milan Linate Airport: Lufthansa and the MEF will transfer take-off and landing slots at Linate airport to remedy takers for the short-haul routes. The number of slots to be divested will exceed what is required to operate these routes and the number of slots added to ITA’s portfolio by the transaction.