What Does Lufthansa’s Acquisition Mean For ITA Airways’ Long-Haul Flights?

Summary

• Lufthansa will eventually own 100% of ITA Airways, pushing it to focus on long-haul expansion.
• Rome Fiumicino will become a key Southern hub for Lufthansa Group, developing connections to South America, North America, and Africa.
• The airline will join Star Alliance by 2026-2027.

Earlier this week, the European Commission approved Lufthansa’s purchase of ITA Airways. This means that eventually, Lufthansa will own 100% of the Italian national carrier, adding to the other airlines in the group, notably Austrian Airlines, SWISS, and Brussels Airlines to name a few. The agreement has wide-ranging consequences not only on the Italian aviation industry but also on connections from elsewhere in the world to the Mediterranean country.

In an interview with Simple Flying, Italy-based transport consultant Andrea Giuricin discussed the move’s importance and the benefits it would bring to the development of the country’s aviation industry. Overall, he believes the move is important in securing Italy’s future aviation expansion.

“It is important to have a partner like Lufthansa to create certain economies of scale and an economy of networks and so on to grow. And for Italy, of course, especially for Rome Fiumicino, the strategy for Lufthansa is to develop on the long-haul especially to South America, North America and Africa. So there is this possibility for ITA Airways and for Italy to have higher direct connectivity on the intercontinental market.”

ITA Airways will fill an important gap in the LH Group strategy

Lufthansa intends to create an important hub at Rome’s Fiumicino (FCO) hub, ITA Airways‘ base. In an interview with Corriere published earlier this week, Lufthansa CEO Carsten Spohr outlined his intentions, shifting the group’s strategy to create a truly global dimension. As it stands, the Lufthansa Group’s key markets are Europe, North America, and Asia, with a less pronounced focus on Africa and South America. ITA Airways will attempt to fill this gap. Spohr said:

“Rome is 1000 kilometres to the south of Frankfurt and 700 kilometers below our Southermost hub that is Zurich. Fiumicino has an ideal position for all connections related to the South of the world, in particular Latin America and Africa. But also the United States.”

This clearly demonstrates the carrier’s potential within the group strategy. Rather than becoming a simple addition to the organization’s existing networks, it will seek to provide additional connectivity to areas of the world that are not necessarily as well-connected in the LH Group network.

ITA recently expanded its network in North America, and just this week, it launched flights to Dakar in Senegal. It also recently announced long-haul expansion to Bangkok. These moves are a testament to the carrier’s growing focus on long-haul connectivity, which will continue to be key to its success given heavy competition on the low-cost side.

These are ITA Airways’ seats on offer to each continent in June 2024, per Cirium data.

The new route to Dakar is inevitably not included in the below June 2024 statistics.

In South America, ITA only operates in Buenos Aires, Rio de Janeiro, and São Paulo. Giuricin says:

“South America I think is a good opportunity to grow with more connectivity also, because it’s the market primarily for Iberia, that we have a lot of what we call to tourism of roots. That means that there is a lot of Italian so a lot of people with origins from Italy, that are living there, from Argentina, from Brazil and from other countries. So is there is a big opportunity there. Of course, also Africa as I think Rome Fiumicino is well positioned.”

What is North America’s role in this?

North America is evidently important to the ITA long-haul strategy. Giuricin told Simple Flying:

“In North America I believe there are around 16 million people in the US alone that identify as having Italian origins. So 16 million, of course is 5% of the population is not huge. But of course it’s 16 million as a potential market also for ITA. So this is great.”

“Also in Canada, there’s a big community of Italians, or with people with origins from Italy. So I think also that kind of market could be interesting for ITA and is easier maybe to reach me with the Italian product, especially if you have a new plane and so on.”

The consultant believes that given significant investments in ITA’s fleet renewal on both the short-haul and the long-haul side, the focus should lie on the carrier’s soft, Italian product. The airline operates A330ceos, A330neo and Airbus A350s on the intercontinental front.

“So if you have good services that’s perfect as I think it’s the key to the success of an airline, of course. With arrival of new planes with already the A330neos and the A350, it could be quite interesting also for that market in North America to be developed more.”

Low-cost growth and the intercontinental market

In a study he conducted, Giuricin notes the gradual reduction in market share held by ITA (and predecessor Alitalia) since 1997, moving from 45% to just 9% in 2023. Several factors caused this change, notably the rise of low-cost carriers.

On the domestic front, Ryanair is the market leader, with a market share (in 2023) of just under 50%, while ITA is trying to hold on to its current 26%. The situation is even worse on the intercontinental market, with a market share below 10% in 2023. Giuricin’s 2024 prediction shows a market share of between 10 and 12% – which is nothing given the airline is a national carrier.

ITA is “unique” compared to its competitors in Europe, notably Air France, KLM, Iberia, and British Airways for instance, where the level of market share across all these sectors is typically much higher. For Italy, the intercontinental side is the most competitive. Giuricin writes:

“It is impossible to find a similar situation in big countries of Europe and it is due to the fact that ITA has a relatively small network for the intercontinental flights at opposite of Air France – KLM or IAG.”

Are the concessions reasonable?

The European Commission outlined a number of concessions required for the deal to go ahead, which Italy and Lufthansa also agreed to.

In the short-haul sector, Brussels has obliged the merged airline to relinquish slots at Milan Linate airport to facilitate a competitor’s entry onto key routes from Italy to Central Europe. On the intercontinental front, the carriers will need to compromise with other airlines to ensure they can compete with ITA on non-stop or one-stop flights, particularly to North America, for example.

Giuricin believes the concessions in the short-haul sector are fair given the merged airline’s significant domination at Milan Linate and on routes to certain LH Group hubs in Europe, such as Brussels, Munich, and Frankfurt. However, the intercontinental sacrifices do not make sense.

I think that the remedies on long-haul routes I criticize because I think that – except for some very very few cases – in general it is full of competition because you don’t have a lot of direct flights.

What’s next for ITA?

Entry into Star Alliance and the transatlantic joint venture (A++) the Lufthansa Group has with United and Air Canada is anticipated for 2026-2027. In addition, Lufthansa intends to bring its total ownership of the Italian airline to 90% at the beginning of 2025.

Expansion on the intercontinental front will be essential to its strategy, especially as Frankfurt (FRA) and Munich (MUC) reach full capacity. On the other hand, Rome-Fiumicino (FCO) has growth potential.

“Right now it is not so easy to find an airport where there’s place to grow, especially among the big hub airports in Europe. Rome Fiumicino has got room to do that. I think that there is the possibility to increase these kinds of intercontinental flights based on a Hub & Spoke network from Rome Fiumicino.”

ITA Airways has already begun pursuing additional intercontinental expansion. Flights to Dakar (Senegal) were opened on July 3 with an Airbus A321neo operating four weekly frequencies. The airline also launched a Rome to Accra (Ghana) connection in June with the same flight. In other news, ITA also announced that services to Bangkok will be inaugurated in November, operating five times a week.

• 

  ITA Airways

  IATA/ICAO Code:

  AZ/ITY

  Airline Type:

  Full Service Carrier

  Hub(s):

  Rome Fiumicino Airport

  Year Founded:

  2020

  Alliance:

  SkyTeam

  CEO:

  Fabio Lazzerini

  Country:

  Italy