EU Risks Dashing Meloni’s Plans For Quick Retreat from ITA Air

Italy’s push for a quick sale of a stake in state-owned ITA Airways to Deutsche Lufthansa AG is at risk of clashing with the pace set by the European Commission.

(Bloomberg) — Italy’s push for a quick sale of a stake in state-owned ITA Airways to Deutsche Lufthansa AG is at risk of clashing with the pace set by the European Commission.

Officials in Brussels are taking a particularly close look at the deal amid concern about Lufthansa’s growing control in Europe, according to people familiar with the matter. As a result, they are seeking responses to a series of broad questions about its plans for ITA, said the people, declining to be named discussing private information.

The transaction hasn’t yet been officially scrutinized by EU antitrust regulators, but could land on their desks as soon as next month, the people said. Lufthansa and Meloni are hoping for an early-stage approval, but the commission’s investigation is likely to be in depth, the people said.

Earlier this week, Meloni criticized officials in Brussels for what she perceived as a too-slow process in the review of the ITA deal, saying that “the same European Commission that asked us for years to find a solution for ITA’s woe, when we find a solution it blocks it.”

A spokesman for the commission said that the transaction has not been formally registered with its merger department. Officials at Lufthansa and the Italian government declined to comment.

Prime Minister Giorgia Meloni wants to complete the sale of a 41% of ITA — agreed in May — as soon as possible to avoid keeping Italian taxpayers fully on the hook for any cash infusions that ITA may need during the slower winter months. The EU is scrutinizing consolidation in the airline industry, and is also gearing up to probe British Airways’ parent IAG SA acquisition of Air Europa.

Approval would pave the way for further equity injections by Lufthansa if required. If successful, it would rid Meloni — who is struggling to keep public finances in check — of a major corporate headache as she looks to keep her election promise of cutting taxes on wages. 

ITA and Lufthansa expect eventual EU remedies to focus on the disposal of slots at Milan Linate airport, the people said. Traffic at the hub is dominated by ITA and the wider Lufthansa group, which includes regional carriers such as Swiss, Brussels Airlines and Austrian. 

While disposals at Linate would be tolerable, demands to dispose of a significant number of take-off and landing rights at other Lufthansa hubs could call into question the logic of the deal, the people said.

Speaking at a conference in Florence on Friday, EU Competition Policy Chief Olivier Guersent poured cold water on the viability of slot remedies in large airlines deals. 

“We see that it doesn’t work,” Guersent said, adding that slots are often not taken up by rival airlines and that the commission now has a “more rigorous approach” to remedies in the airline industry.

EU merger officials are also gearing up to probe IAG’s €400 million purchase of Spanish airline Air Europa. IAG withdrew from an earlier deal in 2021 after it faced an extended European Union antitrust probe.

–With assistance from Chiara Albanese and Alberto Brambilla.

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