Lufthansa Group chief executive Carsten Spohr is optimistic it can secure approval for its planned acquisition of Italian carrier ITA Airways this summer amid what he describes as “constructive” talks with European competition regulators.
The group had originally hoped to secure approval for its 41% acquisition of ITA by the end of last year, but the European Commission flagged competition concerns over the deal. In March, it outlined some short-haul routes to central Europe, long-haul routes to North America and Japan, and ITA’s strong position at Milan Linate airport as key areas of competition concerns.
A deadline for a decision has now been pushed back until 13 June as talks continue over potential remedies between the Commission, Lufthansa and ITA shareholder, the Italian finance ministry.
”Yes, I am optimistic that these constructive talks, which we now need to extend, will end up in agreement,” Spohr said, asked for an update on the talks during a first-quarter earnings call today.
”What is fuelling my optimism? More and more people understand this deal is the right thing for the future of ITA,” he says. ”Italy being the third largest economy in the EU needs direct access to global markets out of Italy. And only an ITA as part of a bigger group can achieve that stability.”
Recent reports have suggested Lufthansa is ready to give up 11 daily slot pairs at Linate to help assuage the Commission’s concerns and Spohr confirms it is one of the challenges to be addressed. ”How do we untangle the dominant situation of Lufthansa plus ITA at Linate? Obviously the answer can only be that we give up a certain amount of slots,” Spohr says.
Other key points include addressing competition concerns on routes where currently only Lufthansa and ITA operate, which he describes as a ”fairly normal challenge” in these types of discussions.
He also flags the challenge of ensuring the ”long-term viability”of a European carrier out of Rome in relation to competition with the big US carriers. ”I think the Commission and we are aligned here,” he suggests.
”These are the three elements of remedy discussions we are having,” says Spohr. ”These talks are constructive. Between the three of us we agreed we need a little more time.
”But I think everybody understood that Lufthansa needs to create value for its shareholders with this transaction, so of course we cannot just move along with anything. That limits the solution space. But I’m still optimistic we find something within that solution space before the summer.”
