Lufthansa’s new ITA remedies not too different from earlier, sources say

12:59 pm Tuesday, April 16th, 2024

By Foo Yun Chee, Ilona Wissenbach and Giuseppe Fonte

BRUSSELS/FRANKFURT/ROME (Reuters) – Lufthansa’s new remedies on its ITA Airways stake buy are not markedly different from an earlier package rejected by EU antitrust regulators which have also discounted Ryanair as a rival in its scrutiny of the deal, people familiar with the matter said.

The two factors are key to whether the German carrier can secure EU antitrust approval for its 325 million euro ($346 million) bid to acquire a 41% stake in Italian state-owned ITA, the successor to Alitalia.

The airline sector has seen a slew of acquisitions in recent months, with the Lufthansa deal and British Airways owner IAG’s bid to buy out Spain’s Air Europa the most high-profile ones.

Lufthansa submitted its latest remedies to the European Commission last Thursday, three months after its first offer was dismissed as insufficient. The EU competition enforcer and the airline did not provide details on both occasions.

The first offer included ceding airport slots, traffic rights and planes to a rival, a person familiar with the matter had told Reuters.

The remedies are not much different from what was submitted previously but there is the possibility of tweaks following feedback from the Commission, rivals and customers, the people said. They declined to be identified because the terms of the deal are confidential.

However, failure to address the EU watchdog’s concerns about competition on short-haul routes between Italy and Central European countries, as well as on long-haul routes between Italy and the United States, Canada and Japan, and ITA’s market power at Milan’s main airport could put the deal at risk of an EU veto.

The Commission’s decision to exclude Ryanair as a rival to Lufthansa despite the Irish budget carrier’s more than 40% market share in Italy also underscores the German airline’s uphill battle.

The regulator sees the two airlines servicing different customers and different kinds of airports, the people said.

Lufthansa is also contesting the Commission’s position on long-haul flights, with the watchdog only considering direct flights, for example between Rome and New York, while the airline says this should include connecting flights from Italy via the hubs of rival carriers, they said.

The Commission, which will decide on the deal by June 6, and Lufthansa declined to comment.

($1 = 0.9404 euros) (This story has been refiled to add dropped word ‘bid’ in paragraph 2)

(Reporting by Foo Yun Chee by Brussels, Ilona Wissenbach in Frankfurt and Giuseppe Fonte in Rome, additional reporting by Angelo Amante in Rome; editing by David Evans)