The fight for ITA Airways has entered a new phase, with two parties submitting their bids with the Italian Ministry of Economic Affairs just before midnight on Monday, May 23. They are MSC and Lufthansa on one side and Certares/Delta Airlines/Air France-KLM on the other side.
According to Corriere Della Sera, MSC/Lufthansa have made an offer for ITA for €1.0 billion after due diligence valued the airline at €1.2 to €1.3 billion. They intend to take an eight-percent share in ITA Airways. Swiss shipping company MSC Group would take a sixty percent share and Lufthansa just twenty percent, which seems surprisingly modest. After three years, the Italian state would be entitled to withdraw from ITA.
The offer would include a medium and long-term strategy that sees ITA Airways be fully integrated within the Lufthansa Group, likely in the same way that other brands like SWISS, Austrian Airlines, and Brussels Airlines have been incorporated within the group. ITA would strengthen its network to both North and South America as well as invest more in cargo. While Rome Fiumicino will remain the main hub for ITA Airways, Milan Linate would be developed further as a secondary hub. This mirrors the strategy of its predecessor Alitalia.
Certares offer slightly lower
Then there is the offer from Certares, a US investment firm already known for its stakes in Azul and LATAM. It is said they have made an offer of €800-850 million, of which €100-150 million would come from Delta Airlines and a maximum of €120 million from Air France-KLM. The Franco-Dutch airline is restricted in its investments by conditions and terms set out by the two governments as long as they haven’t repaid 75 percent of the received state aid. This is one of the reasons that Air France-KLM is doing a rights issue, so it can repay the state aid and free itself from any restrictions.
As Corriere Della Sera remarks, the Certares offer for now seems more financial investment than a strategic one. There could be a commercial integration within Air France-KLM and Delta Airlines, and potentially even with Virgin Atlantic in the UK. Sources tell the newspaper that Certares could be interested in ITA only for a limited period and sell its shares to Air France-KLM or Delta at a later stage.
Indigo Partners out of the race
No longer in the race is Indigo Partners of Bill Franke. The airline group has had a look at ITA’s financials but has opted not to make an offer. If it had, it could have resulted in some sort of partnership with Indigo’s biggest player in Europe: Wizz Air. The Hungarian ultra-low-cost carrier has grown its presence in the Italian market since 2021. Both airlines could have played the role of feeders to each other’s networks. Why Indigo backed out isn’t known, but remember that it has its hand full right now trying to fight off JetBlue and get the merger between Spirit Airlines and its own Frontier Airlines done.
As for ITA Airways, the offers are now to be reviewed by the Italian government and could be subject to changes. The plan is to select the winner no later than June 24.
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
In 2022, he has gone full-time freelance. Richard has been contributing to AirInsight since December 2018. He is also writing for Airliner World and Aviation News and until July 1 2023 in a part-time role with Dutch website and magazine Luchtvaartnieuws. Twitter: @rschuur_aero.