Lufthansa Bids to Buy Stake in Alitalia’s Successor, Betting on Air Travel Recovery

Lufthansa said it wanted to expand in Italy, which it said was its “most important market outside of its home markets and the U.S.,” because of its importance as one of Europe’s biggest economies and most popular vacation destinations.

The move comes amid a recovery in international air travel in the wake of the pandemic, with airlines adding routes and expanding capacity to meet rising demand. ITA has ramped up direct flights to Asia, North America and South America, adding routes from its hub in Rome Fiumicino to New Delhi, the Maldives, San Francisco and Rio de Janeiro.

ITA Airways started operations in late 2021 after the collapse of Alitalia, which had been embroiled in special bankruptcy proceedings for years even before the spread of Covid-19. The new airline relaunched with less than half of Alitalia’s aircraft fleet, reducing its network to focus on profitable routes, with the Italian government searching for a new partner or buyer to reduce the state’s control of the carrier.

Alitalia in its heyday built a reputation for flying Hollywood movie stars and became the official airline of the pope. However, it also struggled to make money—a prospect that has become tougher with rapid expansion in Italy by European low-cost carriers, including

Ryanair Holdings

PLC and

Wizz Air Holdings

PLC, which are undercutting ITA on pricing and costs.

For Lufthansa to secure a deal for ITA, it will need to win the support of the Italian Ministry of Economy and Finance in talks on how ITA can be integrated into Lufthansa’s operations and network.

“Acquiring ITA is one of the most challenging propositions in European aviation,”

Alex Irving,

an equity analyst at Bernstein, said in a note to clients. “The airline has been persistently loss-making, and airlines have invested minority stakes before that have lost their value.”

A consortium of Air France-KLM, Delta and investment firm Certares Management LLC had secured the right to enter exclusive talks with the Italian government in August last year over plans to privatize ITA Airways. However, those negotiations didn’t bear fruit and the period of exclusivity expired at the end of October.

Air France-KLM said Wednesday that it had intended to be part of the talks purely as a potential commercial partner, and not as a majority shareholder. The Italian government wants to ultimately fully privatize the airline.

Air France-KLM will continue to follow ITA’s privatization, it said, adding that it remains interested in partnering with the Italian carrier. ITA remains part of the SkyTeam alliance, which includes Air France and Delta Air Lines.

Lufthansa is a founding member of the rival Star Alliance.

Write to Mauro Orru at [email protected] and Benjamin Katz at [email protected]

Lufthansa said it wanted to expand in Italy, which it said was its “most important market outside of its home markets and the U.S.,” because of its importance as one of Europe’s biggest economies and most popular vacation destinations.

The move comes amid a recovery in international air travel in the wake of the pandemic, with airlines adding routes and expanding capacity to meet rising demand. ITA has ramped up direct flights to Asia, North America and South America, adding routes from its hub in Rome Fiumicino to New Delhi, the Maldives, San Francisco and Rio de Janeiro.

ITA Airways started operations in late 2021 after the collapse of Alitalia, which had been embroiled in special bankruptcy proceedings for years even before the spread of Covid-19. The new airline relaunched with less than half of Alitalia’s aircraft fleet, reducing its network to focus on profitable routes, with the Italian government searching for a new partner or buyer to reduce the state’s control of the carrier.

Alitalia in its heyday built a reputation for flying Hollywood movie stars and became the official airline of the pope. However, it also struggled to make money—a prospect that has become tougher with rapid expansion in Italy by European low-cost carriers, including

Ryanair Holdings

PLC and

Wizz Air Holdings

PLC, which are undercutting ITA on pricing and costs.

For Lufthansa to secure a deal for ITA, it will need to win the support of the Italian Ministry of Economy and Finance in talks on how ITA can be integrated into Lufthansa’s operations and network.

“Acquiring ITA is one of the most challenging propositions in European aviation,”

Alex Irving,

an equity analyst at Bernstein, said in a note to clients. “The airline has been persistently loss-making, and airlines have invested minority stakes before that have lost their value.”

A consortium of Air France-KLM, Delta and investment firm Certares Management LLC had secured the right to enter exclusive talks with the Italian government in August last year over plans to privatize ITA Airways. However, those negotiations didn’t bear fruit and the period of exclusivity expired at the end of October.

Air France-KLM said Wednesday that it had intended to be part of the talks purely as a potential commercial partner, and not as a majority shareholder. The Italian government wants to ultimately fully privatize the airline.

Air France-KLM will continue to follow ITA’s privatization, it said, adding that it remains interested in partnering with the Italian carrier. ITA remains part of the SkyTeam alliance, which includes Air France and Delta Air Lines.

Lufthansa is a founding member of the rival Star Alliance.

Write to Mauro Orru at [email protected] and Benjamin Katz at [email protected]