MILAN: Lufthansa agreed on Thursday (May 25) to buy a stake in ITA Airways, created from the ashes of state-owned Alitalia, marking the German airline giant's expansion in a key European market.
The accord is big news for Italy, which has spent billions of euros over the years trying to get the national airline back on its feet.
Lufthansa, one of Europe's biggest carriers, said it would pay 325 million euros (US$348 million) for a 41 per cent stake in ITA, and that the Italian finance ministry would also contribute 250 million euros.
The deal provides the German company various options to increase its stake or acquire it outright at a later date.
The agreement was "good news for Italian consumers and for Europe, because a stronger ITA will invigorate competition in the Italian market," said Lufthansa CEO Carsten Spohr in a statement.
"As part of the Lufthansa Group family, ITA can develop into a sustainable and profitable airline, connecting Italy with Europe and the world. At the same time, this investment will enable us to continue our growth in one of our most important markets."
Italy is Europe's third-biggest aviation market and a major destination for both tourists and business travellers, said Lufthansa.
The deal is subject to approval from authorities, it said.
In mid-January, Lufthansa submitted its offer to acquire an initial minority stake in the Italian airline.
The deal was finalised in Rome between Spohr and Italian Finance Minister Giancarlo Giorgetti.
The finance ministry said the company's business plan forecasts revenue growth of 2.5 billion euros this year, rising to a forecasted 4.1 billion in 2027.
"These results will allow for the growth and renewal of the fleet," the ministry said in a statement, adding it expected the number of planes to rise to 94 at the end of 2027 from 71 currently.
ITA's workforce, which is expected to hit 4,300 this year, will grow to more than 5,500 at the end of the plan, it said.
"ITA Airways' strategy is to establish itself as a leading full service carrier in the three sectors of intercontinental, international and domestic, with a focus on long-haul traffic," it added.
ITA will remain a standalone airline with its own management, Lufthansa said. The German group's existing airlines are Lufthansa, Eurowings, Austrian, Swiss and Brussels Airlines.
Alitalia, which was placed under public administration in 2017, accumulated losses of 11.4 billion euros between 2000 and 2020.
It was eventually shut down in October 2021, leaving the runway clear for ITA Airways.
ITA launched in a market struggling to recover from the turbulence of the coronavirus pandemic, but Brussels gave the state a green light for a 1.35-billion-euro injection to help it take to the skies.
Lufthansa also faced problems in recent years, suffering massive losses during the pandemic which led to it being bailed out by the German government.
But it recovered strongly as travel demand rebounded, and returned to annual profit last year.