Lufthansa is circling Italy’s ITA Airways – the state-backed reboot of Alitalia – with the Italian government receiving a bid from the Germam carrier and its consortium partner, container giant MSC Mediterranean Shipping Co, according to people familiar with the matter.
If successful, Rome would become the Lufthansa group’s fifth hub, serving as a southern European hub alongside Frankfurt, Munich, Zurich (under Swiss) and Vienna (under Austrian Airlines).
The Lufthansa-MSC bid is up against another headed by US-based travel and tourism-focused investment firm Certares Management.
However, both offers are about €200 million lower than the initial ones, said one of the people who declined to be named because the negotiations are not public.
ITA expects to close the transaction by the end of the year, Chief Executive Officer Fabio Lazzerini said last month.
Aeroporti di Roma CEO Marco Troncone has previously endorsed Lufthansa’s plans, saying “we are very positive about the Lufthansa business model. The company has extensive experience in dealing with post-crisis carriers and managing multiple hubs.”
Troncone said that a Lufthansa-ITA combination would bolster Rome Fiumicino’s status as a long-haul hub from the Mediterranean region to North America, Asia and Middle East, while also boosting domestic markets.
Rome’s location in central Italy puts it beyond the immediate catchment areas of Lufthansa’s Munich hub, which has competed with more northerly airports including those in Milan.
ITA needs to team up with a larger carrier to boost revenue, while Fiumicino would benefit from being Lufthansa’s new interchange for southern Europe.
Rome as southern European hub
"When it comes to investments, we are only interested in restructured airlines, and we believe ITA is one of them” Lufthansa CEO Carsten Spohr told a news conference in May.
Spohr said Italy was already Lufthansa's most important market in Europe, and globally its second largest after the United States, as it is the biggest intercontinental carrier for both Italians and people travelling to the country from abroad.
“Rome could play a very important role within Lufthansa,” he added, serving as a hub in southern Europe to complement Lufthansa's existing strong network in the north.
Lufthansa’s muscle-bound partner in a potential bid valued at up to €1.5 billion is Mediterranean Shipping Co, the world’s largest container shipping line – its fortunes buoyed by a surge in shipping fees during the pandemic – which also controls MSC Cruises, the world’s third-largest cruise brand.
Air France, Delta also in the wings
Also in the running is a consortium of Delta Air Lines, Air France-KLM and US fund Certares Management.
“Air France-KLM is in the lead in terms of actually making a potential investment,” clarified Delta CEO Ed Bastian, speaking with reporters in March. “We’re providing strategic support through our partnership.”
ITA predecessor Alitalia was a long-standing member of the Delta-led joint venture on trans-Atlantic flights, something Bastian said couldn’t be the case with ITA if the Italian firm were to partner with a competitor such as Lufthansa, which alongside United Airlines competes in the Europe-U.S. market against Delta, Air France-KLM and Virgin Atlantic.
A bid for ITA could herald another chapter in the decades-long saga of Italy’s search for a viable national carrier. It comes as airlines seek to move beyond Covid-19, which has crushed demand for two years. The pandemic proved to be the final blow for Alitalia after it had already racked up debt.
ITA started flying in October, after replacing Italy's 75-year-old carrier Alitalia which was finally grounded after years of losses and failed rescue attempts.
The Italian government would retain a minority, non-controlling stake in the privatised ITA.