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Germany’s Deutsche Lufthansa AG
Hairs 5.13%
The Italian airline, formerly known as Alitalia, has said it has made a bid to buy shares in the airline, betting on its continued recovery.
Lufthansa said on Wednesday it is seeking special talks with the Italian government to initially acquire a minority stake in ITA Airlines, with an option to buy the remaining shares at a later date. The move follows an alliance involving Air France-KLM group AFLYY. 1.45%
and Delta Air Lines Inc.
D.L 1.01%
After entering talks last year, he failed to reach an agreement to buy a stake in ITA.
Lufthansa said it wants to expand in Italy, which it says is “the most important market outside the US and its domestic market” because of its importance as one of Europe’s biggest economies and most popular vacation destinations.
The move comes amid a recovery in international air travel following the pandemic, with airlines adding routes and expanding capacity to meet rising demand. ITA has increased direct flights to Asia, North America and South America.
ITA Airlines will start operations in late 2021 after the collapse of Alitalia, which had been in special insolvency proceedings for years before the spread of Covid-19. The new airline has restarted operations with less than half of Alitalia’s fleet, shrinking its network to focus on profitable routes, while the Italian government seeks a new partner or buyer to reduce control of the carrier.
ITA Airways was launched after the collapse of Alitalia, which was languishing in special insolvency proceedings.
Photo:
JC Hong / Associated Press
Alitalia built a reputation for flying Hollywood movie stars during its heyday and became the Pope’s official airline. However, it has also struggled to make money—a prospect that is expected to expand rapidly in Italy as European low-cost carriers, including Ryanair Holdings PLC and Wizz Air Holdings PLC, are cutting back on fares and expenses.
In order for Lufthansa to obtain approval for ITA, it will need the support of the Italian Ministry of Economy and Finance in talks to discuss how ITA will be integrated into Lufthansa’s operations and network.
“Acquiring ITA is one of the most challenging propositions in European aviation,” Bernstein equity analyst Alex Irving said in a note to clients. The airline is constantly incurring losses, and airlines have invested in small shares that have lost their value before. “
A consortium of Air France KLM, Delta and investment firm Sertares Management LLC secured the right to special talks with the Italian government in August last year over plans to privatize ITA Airlines. However, those negotiations did not bear fruit and the exemption period expired at the end of October.
Air France-KLM said on Wednesday that it was part of the talks as an alternative commercial partner and not as a majority shareholder. The Italian government wants to fully privatize the airline.
Air France-KLM has stated that it will continue to pursue the privatization of ITA, and that it is interested in partnering with the Italian carrier. ITA is part of the SkyTeam alliance, which includes Air France and Delta Air Lines.
Lufthansa is a founding member of rival Star Alliance.
Write to Mauro Orru at mauro.orru@wsj.com and Benjamin Katz at ben.katz@wsj.com
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