The takeover of the Italian airline ITA Airways by Lufthansa is under close scrutiny by the European Commission.
The EU authority has expressed concerns about market dominance on certain transatlantic routes. In order to approve Lufthansa's entry into ITA, strict conditions must be met. These primarily involve breaking up monopolies on important North American routes from Rome. Lufthansa is facing unexpected demands in negotiations with competitors such as Air France-KLM and the International Airlines Group (IAG), which make the deal more complicated than expected.
Market power on North American routes: EU intervenes
The EU Commission is concerned that Lufthansa and ITA Airways could jointly gain too much market power on routes to Washington, Chicago, San Francisco and Toronto from Rome. These four cities are among the economically and strategically important destinations in transatlantic air traffic. To prevent a monopoly-like situation, the EU is demanding that Lufthansa also open these routes to competitors. The deadline by which this condition must be met is November 4, 2024.
Lufthansa has therefore started talks with its competitors Air France-KLM and IAG, the parent company of British Airways and Iberia. Both companies would be able to connect Rome-Fiumicino with their hubs in Paris, Amsterdam, London and Madrid and thus meet the EU requirements. There is also a practical regulation: if the transit time between feeder and long-haul flights is less than three hours, the EU requirement would already be met.
Surprising demands from competitors
However, the negotiations in which Lufthansa wants to give competitors access to the valuable North American routes are not going as smoothly as expected. According to reports in the Italian newspaper Corriere Della Sera, Lufthansa and ITA are being confronted with surprising demands in the talks with Air France-KLM and IAG: Both companies do not want to be satisfied with just the slots for the North American routes, but are also demanding attractive take-off and landing windows at another important location - Milan Linate Airport.
Milan-Linate is a central transport hub for Italy and is of enormous importance for the northern economic area in particular. Lufthansa and ITA have previously had to give up slots at this airport. The EU Commission has demanded that a total of 15 daily take-off and landing slots at Milan-Linate be released for flights to Lufthansa hubs. These slots could benefit potential competitors such as the British Easyjet or the Spanish Volotea, who have already signaled interest in these opportunities.
The importance of slots in Milan-Linate
The demands of Air France-KLM and IAG for additional slots at Milan Linate show the strategic importance of this airport. Linate is the smaller but more centrally located airport in Milan and is preferred by business travelers due to its proximity to the city center. Lufthansa had already made concessions in Milan, but the loss of further slots could further weaken its position on the Italian market.
For competitors, Milan-Linate is an attractive market as it offers access to a wealthy and business-oriented customer base. Air France-KLM and IAG apparently see this as an opportunity to secure valuable take-off and landing rights that could strengthen their own market position while limiting the expansion of Lufthansa and ITA in Italy.
A complex deal with far-reaching consequences
The deal between Lufthansa and ITA Airways is a complex business that goes far beyond the mere takeover of an airline. The EU Commission has ensured that Lufthansa does not gain a dominant position on the important routes to North America. But the demands of competitors such as Air France-KLM and IAG to obtain additional take-off and landing rights at other airports such as Milan-Linate are making the negotiations more difficult.
Lufthansa now faces the challenge of meeting EU requirements on the one hand and defending its market position in Italy on the other. The release of additional slots in Milan could weaken the company, while the loss of valuable connections to North America could affect ITA Airways' growth potential. This could have long-term implications for Lufthansa's expansion strategy in southern Europe.
Future prospects for Lufthansa and ITA Airways
Lufthansa's acquisition of ITA Airways is seen as a strategic move to gain a stronger foothold in southern European markets and a greater reach in international air travel. Italy is Europe's second-largest air traffic country after Germany, and Rome and Milan are major hubs for flights to the US, Canada and beyond. The agreement with ITA Airways could help Lufthansa compete in a highly competitive market, provided it successfully navigates the regulatory hurdles.
However, the talks with Air France-KLM and IAG show that competition in the aviation industry is tough and every opportunity is used to gain an advantage. How Lufthansa will react to these demands remains to be seen. What is clear, however, is that the outcome of these negotiations will have far-reaching consequences for both Lufthansa and the entire European aviation market. Lufthansa faces a double challenge in the context of the ITA Airways deal. On the one hand, it must meet the strict EU requirements for market dominance on transatlantic routes and, on the other hand, defend its market position in Milan and Rome. The unexpected demands of Air France-KLM and IAG for additional slots at Milan-Linate could further complicate the deal. The coming weeks will be crucial to determine the future of Lufthansa and ITA in one of the most competitive
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