ITA sale: Big questions from EU regulators

Italy’s attempt to get out of the airline business by selling off state-owned ITA Airways is limping toward what was supposed to be a smooth exit, with the airline taken over by Germany’s Lufthansa group. The remaining issue is approval by the EU’s Competition Commission, and it appears that won’t be an easy hurdle.

ITA was formed from remnants of the bankrupt Alitalia, which had returned to state ownership in its bankruptcy process. The government always intended to privatize ITA, which has cost it billions to keep afloat. The deal with Lufthansa sees the German airline group paying €325 million for 41% of the shares and management control. Italy would invest another €250 million, and give Lufthansa the right to eventually buy the remaining 59%.

The Competition Commission, led by Margrethe Vestager, has set June 6 as the date for its decision to either block the deal, approve it with conditions or let it go as is, but has indicated that the third course is unlikely.

“We want to further assess the transaction and ensure that the acquisition of ITA does not reduce competition in short-haul and long-haul traffic and that it will not lead to higher prices, less capacity or lower quality for passenger air transport services in and out of Italy,”  Vestager said in a statement. Italy’s Finance Minister has said he expects the EU will do a “Phase 2 review,” which would add months to the process.

Among the conditions that have been discussed over the past few months are requiring ITA and Lufthansa, including its Swiss, Austrian and Brussels brands, to give up a large number of slots at Milan’s Linate Airport, which is dominated by ITA. Ryanair, which has the largest share of domestic business in Italy and had opposed the deal originally, says it would be happy with such a solution as it would like to take up the surrendered slots.