It’s been far too long since I’ve written about the worst airline ever, but now seemed like the right time to jump back in and check on ITA, or Alitalia in disguise.
ITA and the Italian government had dreamed of having one of the big airline groups take a stake for years, but they were never able to nail down a suitor. That’s what happens when you are a sustained train wreck.
When we last left off in May of 2023, Lufthansa Group (LHG) agreed to buy a 41 percent stake in the airline for €325 million which would bring ITA into the LHG stable of airlines. The deal was done, pending regulatory approval.
Naturally, it couldn’t be just a simple transaction. Now, the European Commission has told LHG that the “preliminary” view is that this acquisition “may restrict competition.”
This is probably true. When you have a mess of an airline like ITA that is run more for the employees than anyone else, putting a competent management team from another airline in charge is going to most definitely eliminate lower fares and bad ideas. So it’s not just losing a competitor, but it’s losing a dumb one that makes this a real threat. Fares will probably rise, and services will be pared or moved around. that’s where the concern lies here.
Specifically, the EC has three areas of concern.
Reduce competition on a certain number of short-haul routes connecting Italy with countries in Central Europe
The first worry is on routes where the airlines overlap. Looking solely at nonstop flying, this summer sees overlap between ITA and LHG as follows:
- Milan/Linate – Brussels: 3x daily on ITA, 3x daily on Brussels Airlines
- Milan/Linate – Frankfurt: 3x daily on ITA, 4x daily on Lufthansa
- Rome – Brussels: 2x daily on ITA, 3x daily on Brussels Airlines
- Rome – Frankfurt: 2x daily on ITA, 5x daily on Lufthansa
- Rome – Munich: 2x daily on ITA, 5x daily on Lufthansa
- Rome – Zurich: 2x daily on ITA, 4x daily on SWISS
The EC isn’t just concerned about the nonstops though. It’s also concerned about connecting itineraries. This makes sense when you consider that Lufthansa has a large northern Italian operation that feeds through Munich. There would be significant overlap between the two airlines where others may not compete.
My favorite part of this is where the EC says “Competition in such routes appears limited and comes primarily from low-cost carriers, such as Ryanair, who in many cases operate from more remote airports.”
Yes, yes that’s true. But maybe the EC hasn’t noticed that Germany is remarkably unfriendly to new entrants that aren’t just another Lufthansa subsidiary with a silly name. Ryanair has shouted from the rooftop for years about how hard it is to get anything useful there. Denying an LHG/ITA merger is not the right answer, but requiring slots to be divested in Munich and Frankfurt… well that might be interesting.
Reduce competition on a certain number of long-haul routes between Italy and the US, Canada and Japan
Here we see the consequences of the ever-consolidating Transatlantic market — plus the always less-competitive Japanese one. There are exactly zero overlapping nonstop routes between LHG and ITA on long-haul flying. ITA flies long-haul only from Rome while LHG flies from its hubs in Brussels, Frankfurt, Geneva, Munich, Vienna, and Zurich. So that isn’t an issue.
The real problem is connecting markets. The big three joint ventures control nearly everything over the Atlantic. You have Delta/Air France-KLM/Virgin Atlantic, American/IAG/Finnair, and United/Air Canada/LHG. ITA used to be a part of the Delta joint venture, but it’s not there any longer so technically it is one of the few independent operators over the Atlantic, lumped in with the likes of other three letter airlines LOT, TAP, and SAS (until it joins the Air France-KLM joint venture soon).
ITA doesn’t have a very large footprint. Most of its connections center on Italy or the surrounding Mediterranean countries. Of course, LHG can get people there as well, so this would reduce competition in those few markets.
In Japan, you have similar dynamic with fewer players. There’s LHG aligning with ANA and IAG aligning with Japan Airlines. Air France-KLM has friends at Korean which can still serve the market through Incheon. But it’s the same problem as over the Atlantic. The 1x daily ITA flight from Tokyo/Haneda to Rome offers another competitor in the market. That would go away.
What’s the solution here? Presumably it might involve opening up additional access at Haneda, but I don’t know what unaligned airline would step up to use that slot. There is no easy answer on this one.
Create or strengthen ITA’s dominant position at the Milan-Linate airport
This is a tricky one. Linate is the close-in airport to Milan’s city center. It’s only a 15 minute drive east of the city, and it is very convenient. Malpensa is about 45 minutes northwest of town, though it does have good train connectivity. The only downside is you have to get by Chef Boyardee to get there.
(Funny story… the real Chef Boyardee is Ettore Boiardi and he was born in a Milan suburb, but it was actually an hour south of town on the way to Bologna. So that’s clearly why Bologna never took off as a reliever for Milan.)
Malpensa is not going anywhere. It is the primary international, long-haul airport and it sees ample service today. Linate is a great city airport with connectivity in important business markets. For that reason, it is desirable. And ITA has a lock on the place.
Milan/Linate Departure Share by Month
Data via Cirium
Back in the old days, Meridiana had a notable operation there, but it went belly up, and even with the new Aeroitalia and easyJet’s growth, ITA now has a higher share of operations than it did before, usually a bit north of 60 percent of departures.
LHG just happens to be number two in the market. It is now sitting in the 8 percent range. This is an obvious concern for the EC, but in this case, I would think slot divestitures would be a very clear way to solve the issue. It’s not clear that LHG would like this plan.
Now, we wait to see what really comes of this. I would imagine LHG will work on a package to try to satisfy the EC. But if not… well get ready for the continued independence of the worst airline ever, at least until it goes bankrupt again.
This week’s episode of The Air Show podcast was a no-brainer. It’s the Boeing episode. Listen to all of the wisdom that Jon Ostrower has to share from his detailed reporting, along with a talk about what the future holds. It will be live today.
