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The European Commission launches an in-depth look at competitive costs of the Lufthansa deal for ITA

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LA Post: The European Commission launches an in-depth look at competitive costs of the Lufthansa deal for ITA
January 23, 2024
COLLEEN BARRY - AP

MILAN (AP) — The European Commission on Tuesday announced an in-depth investigation of German airline Lufthansa’s planned takeover of Italian carrier ITA Airways, citing competitive concerns.

Lufthansa signed a deal last year for a 41% minority share in the long-struggling ITA Airways, formerly Alitalia. The deal calls for a 325-million-euro ($354 million) investment by Lufthansa, and another 250 million euros ($272 million) from the Italian Finance Ministry. Lufthansa would have the option of buying the remaining shares at a later date.

The European Commission cited concerns about reduced competition on short-haul flights between Italy and Central Europe and long-haul routes between Italy and the United States, Canada, Japan and India.

ITA Airways and Lufthansa compete on the Central European flights, where low-cost players generally serve secondary airports. On the longer-haul routes, ITA is competing against Lufthansa and its partners Air Canada and United. The commission also said the deal could strengthen ITA’s dominant position at Milan’s Linate airport.

The commission said that it would make a decision by June 6. The commission has the power to set conditions for the deal. It said that Lufthansa’s response to preliminary concerns was insufficient.

Airline analyst Gregory Alegi said that the commission’s concerns were a paradox, since 20 years ago it had taken the position that the European Union market wasn’t big enough for the many flagship carriers that existed at the time.

“Now you start working about not enough competition?" said Alegi, a LUISS University professor, calling the flip in approach “an indictment of this high-level attempt to shape markets by regulation.”

ITA was formed in October 2021 on the ashes of Alitalia, which had gone through a series of bankruptcies, government bailouts and failed partnerships as subsequent governments tried to prevent its demise. At the time, the commission insisted on a new name to mark a break with the 74-year-old carrier’s past.

“The commission’s patience has been tested with Alitalia’s several bailouts, and ITA airways came about, because a previous government would not let it collapse, so there had to be a total break,’’ Alegi said.

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