Lufthansa Group's bid to acquire ITA stake gets EU approval; Star Alliance integration planned

European regulators have authorized Lufthansa Group's purchase of a 41% stake in the struggling Italian flag carrier ITA Airways, the company announced on Wednesday. The deal, which is expected to finalize later this year, will position ITA as the latest airline in a growing wave of consolidation in Europe’s aviation sector.

As part of the agreement, ITA is expected to join the Miles & More loyalty program, according to Lufthansa executives. The airline is also "targeting" integration into the Star Alliance network.

EU gives the go-ahead

The European Commission's approval in Brussels comes over a year after the two companies first revealed their plans, which will see Lufthansa acquire a 41% stake in ITA Airways.

The agreement allows Lufthansa Group the option to acquire the remaining 59% of ITA shares in the future. If Lufthansa moves forward with this option, the acquisition could take place as early as 2025, according to the arrangement approved by European Union regulators this week.

Lufthansa Group expects to finalize the merger by the fourth quarter of this year, according to a company statement. Following completion, ITA is set for a "quick integration" into the group, which already includes several major European carriers.

"We are excited to soon welcome ITA Airways and its exceptional team to our airline family," said Lufthansa Group CEO Carsten Spohr in a statement on Wednesday.

ITA Airways was established in 2020 from the remains of Alitalia, and the Italian government took control of the struggling airline during the COVID-19 crisis. However, ITA has yet to overcome Alitalia's notorious history of financial losses.

Same brand, but with a fresh alliance and loyalty program on the horizon

As part of joining Lufthansa Group, ITA Airways will continue to operate under its current brand, aligning with similar trends seen in recent European airline mergers.

ITA will become the sixth member of the Lufthansa Group, alongside Lufthansa, Eurowings, Swiss, Austrian Airlines, and Brussels Airlines.

Once the deal is finalized, Lufthansa Group announced that ITA will immediately begin codesharing with its new sister airlines.

ITA will also integrate into the Miles & More loyalty program, joining the other group airlines, and will share booking and sales channels, plus leverage "numerous synergies" in areas like aircraft and fuel procurement.

A significant change yet to take place is ITA Airways' shift from its current SkyTeam alliance to the Star Alliance, which includes Lufthansa Group's full-service airlines.

Lufthansa Group announced its intention for ITA to join the Star Alliance in the "near future," marking a major step in the merger process.

This transition could provide Star Alliance members with new opportunities to earn miles and redeem rewards on flights to Rome Fiumicino Leonardo da Vinci Airport (FCO), which will become the Lufthansa Group’s southern hub.

ITA's network

ITA Airways operates nonstop flights to more than half a dozen U.S. cities from Rome. As of July 2024, its routes will include Los Angeles (LAX), San Francisco (SFO), Chicago (ORD), and several East Coast airports including Boston (BOS), New York (JFK), Washington (IAD), and Miami (MIA).

Consolidation within European airlines

The acquisition of ITA Airways is another chapter in the ongoing consolidation trend sweeping through the European airline sector.

Europe now has three dominant airline groups leading the market.

In addition to Lufthansa Group, the International Airlines Group (IAG) controls major airlines including British Airways, Iberia, Aer Lingus, and the budget carrier Vueling. It’s also notable that Finnair and Qatar Airways collaborate with several IAG airlines, sharing Avios as a common loyalty currency.

The Air France-KLM Group, which operates its two flagship airlines in Paris and Amsterdam, has finalized an agreement to acquire a stake in Scandinavian Airlines, though it is still awaiting regulatory approval.