Lufthansa has received antitrust clearance from the European Union (EU) to acquire 41% of ITA Airways for 325 million euros (about $350 million) following the sale of certain routes and slots, the company announced Wednesday, July 3.
Lufthansa stock has been up 3.27% at 1:39 p.m. GMT after the news.
Footprint Expansion of Lufthansa
One of three high-profile sector deals in Europe, the deal would increase Lufthansa's footprint in the lucrative southern European market. It highlights the company's ambition to increase size to counteract rising operational expenses.
In a news conference in Rome, Reuters reported that Lufthansa CEO Carsten Spohr said the firm had improved connectivity to Latin America and Africa via ITA's Fiumicino airport hub, and that there was a lot of space for expansion.
ITA's long-haul routes are significant to Lufthansa, which has the option to acquire full control of the Italian airline if its financial performance improves.
What To Expect
According to the European Commission, Lufthansa and ITA have offered some of their Italian short-haul routes to their competitors. Lufthansa has said it is now negotiating with Easyjet and low-cost Spanish carrier Volotea.
The merged company will also enter into slot swaps or interlining agreements to enhance connections for one-stop flights and boost frequency on long-haul routes.
Through interlining agreements, individual airlines can accommodate customers whose itineraries include flights on more than one carrier. A portion of ITA's short-haul flight slots at Milan's Linate airport will also be transferred to rivals, fostering the establishment of a sustainable base.
A Lufthansa representative told Reuters the airline will provide 204 weekly slots at Milan's Linate Airport during the summer and 192 during the winter. Consequently, fewer slots will be available to ITA and Lufthansa due to the new agreement.
The representative said it would also improve connectivity for its rivals in major North American cities like Washington, San Francisco, and Toronto.
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