Last minute agreement between Lufthansa and Mef for the wedding with Ita. The Ministry of Economy and the German giant reached an agreement after a weekend of hard work between the legal teams.
In essence, the German group has given up on asking for a price discount. Discount foreseen, according to some interpretations, by the agreements signed, but categorically excluded by the Treasury. Minister Giorgetti’s firm line therefore prevailed.
Ita-Lufthansa, agreement in extremis
The signature, which arrived late yesterday evening, is preparatory to the sending to Brussels of the plan that establishes the marriage between the two airlines. «The Mef – we read in the note released yesterday evening – communicates that the agreements included among the corrective measures presented with reference to the concentration operation which provides for the entry of Deutsche Lufthansa into the capital of Ita Airways, as foreseen in the European Commission’s decision of 3 July 2024. The definitive approval of the European Commission is confidently awaited to proceed with the closing of the operation. The expected economic conditions – the Treasury then points out – have not undergone any changes compared to the agreement already signed”.
ON THE STREET
As will be remembered in recent days, the Frankfurt group, leveraging some contractual clauses, had deemed it possible to ask for a reduction of a few million (from 10 to 90) on the second tranche to be paid to the shareholder Tesoro (325 million), to take over a further 49% of Ita. A different assessment linked to the presumed loss of value of any assets of the Italian carrier due to the delayed closing of the operation. Be that as it may, this knot was untied after a phase of great tension. Beyond the skirmishes, however, no one ever thought of ruining the alliance. Also in light of the fact that the first reserved capital increase, again of 325 million, to acquire the 41% share of the blue company, has already been paid by the Germans. A great deal of work has been done in recent days by the head of the MEF economics department, Marcello Sala. It certainly took a lot of patience and the painstaking work of the “bridge builders” to reach a meeting point. An important role was played by the president of Ita Antonino Turicchi who smoothed out the conflicts and contributed to “peace”. Carsten Sphor, Lufthansa’s number one, would have chosen the ITA headquarters as a point of support for negotiating with the Treasury. The November 11th deadline for sending the “remedies” to Brussels will therefore be respected (a necessary step to get the final green light for the wedding). This involves the concession of a series of routes and slots to competing companies to obtain the green light from the EU Antitrust. It must be said, however, that a possible postponement of a few days would not have created problems for the European Commission.
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Lufthansa and Ita: A Marriage of Necessity
Have you ever heard the phrase “marriage is a partnership”? Well, if you thought that was a romantic slogan for a wedding invitation, think again! Over the weekend, Lufthansa and the Italian airline Ita came together, not in a chapel, but in a negotiation room, and let’s just say, their vows involved a lot of fine print and a side of legal jargon!
After some exhausting weekend negotiations, where I imagine the legal teams were burning the midnight oil – or possibly just burning their sanity – the German aviation giant and the Italian Ministry of Economy forged an agreement that would make even the strictest of in-laws nod in approval. No discount was to be asked for, no “take-backsies” on the financial commitments, just the promise of a turbulent yet exhilarating union.
The Wedding of the Century: Ita-Lufthansa
And so, with a flourish of pens (and probably a few deep breaths), the signatures flew onto the documents late last evening, paving the way for this highly anticipated union. The Ministry of Economy announced this was merely a pre-emptive strike—I mean, step—toward sending their “wedding proposal” to Brussels regarding the merging of the two airlines. It’s like a biz-heavy version of “Say Yes to the Dress”, but instead of a dress, we’ve got a financial plan!
The Treasury, led by Minister Giorgetti, held firm against Lufthansa’s attempt to wrangle a price discount during negotiations, which might as well have made him the ice queen of this marital saga. After all, who doesn’t love a good bit of tension before the big day? It reminds you that there’s some passion involved, doesn’t it? And let’s be real, it’s not a proper wedding without a little drama!
But wait, let’s not get too carried away here! A few days ago, Lufthansa was contemplating a price reduction—looking to shave off a cool few million (from a jaw-dropping 10 to 90 million). They claim it was due to the “suspected drop in value” of Ita’s assets as negotiations dragged on like a soap opera. Even the best of relationships have their rough patches, right? Just ask any couple who’s ever attempted IKEA furniture assembly!
Yet, in the end, they managed to untangle this mess like pros! I mean, sure, there were tempers and frustrations—probably a few cups of coffee and late-night phone calls to discuss the future of their lofty aspirations—but ultimately, their meetup led to an agreement none of us thought would happen. Hats off to Marcello Sala, the head of the MEF economics department, who undoubtedly deserves a medal for patience in this marriage of convenience!
Of course, credit where credit’s due: Antonino Turicchi, president of Ita, played the role of the diplomatic peacemaker. If only every couple had someone like Turicchi to smooth over the bumpy patches! Lufthansa’s big boss, Carsten Sphor, chose to conduct negotiations right from Ita’s headquarters—as if setting a cozy atmosphere would somehow thaw the cold financial realities! “Hey, let’s finalize a deal over a cappuccino,” he likely suggested, hoping that baked goods could soften the sharp edges of contract negotiations.
Next Steps: The Countdown to Approval
And as the clock ticks down on November 11th, the deadline for submitting their proposals to Brussels, we find our protagonists with one objective: to win the approval of the EU’s Antitrust authority. They will need to concede a few routes and slots to competing airlines—kind of like throwing that one wild bachelor at the wedding party just to keep things fair. It’s all very civil, really!
But should they need to stall the process for a few days, let’s be real—nobody at the European Commission is sweating over a little delay. After all, their deadlines are about as flexible as a yoga instructor on a beach holiday!
So there you have it, folks: the saga of Lufthansa and Ita’s hard-fought agreement. A little drama, a hint of romance (or should I say ‘financial negotiations’), and a whole lot of legalese. Cheers to love in the age of mergers and acquisitions, where saying “I do” comes with a side of clause negotiation! Do we have any bridesmaids available to pass the champagne?
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In a last-minute breakthrough, Lufthansa and the Ministry of Economy (Mef) finalized an agreement crucial for the impending merger with Ita. After an intensive weekend of negotiations between their respective legal teams, a consensus was reached, allaying concerns regarding the deal’s future.
Significantly, the German airline has opted against pursuing a price discount that some interpretations of prior agreements suggested could be possible. This potential concession was categorically dismissed by the Treasury, with Minister Giorgetti’s firm stance ultimately prevailing in the discussions.
Ita-Lufthansa, agreement in extremis
The agreement, signed late yesterday evening, paves the way for the submission of a strategic plan to Brussels, officially outlining the merger between the two airlines. “The Mef,” the official note stated, “confirms that the agreements involve corrective measures associated with the consolidation process that allows Deutsche Lufthansa to invest in Ita Airways,” a move sanctioned by the European Commission’s decision dated July 3, 2024. The Treasury expressed optimism, stating that they are eagerly awaiting the European Commission’s final approval to finalize the deal, emphasizing that the economic conditions stipulated in the previous agreements remain unchanged.
ON THE STREET
The Frankfurt-based airline had previously cited certain contractual clauses, believing it warranted a revised payment structure that would see a decrease of millions, potentially negotiating the second tranche payable to the Treasury from an initial 325 million euros down to a range between 10 and 90 million euros. This adjustment was based on concerns over the perceived loss of value of potential assets belonging to the Italian carrier due to the protracted negotiations. Nevertheless, the tensions surrounding this issue were ultimately resolved, ensuring that no one envisioned a breakdown of this crucial alliance. This is especially notable given that Lufthansa has already made a substantial capital investment of 325 million euros to acquire a 41% stake in the national airline.
Much credit is due to the diligent efforts of Marcello Sala, head of the Ministry of Economy’s economics department, who devoted extensive time and attention to navigating the complexities of these negotiations. The role of Ita’s president, Antonino Turicchi, was instrumental as he played a significant part in easing tensions and fostering collaboration. Carsten Spohr, the CEO of Lufthansa, strategically chose the ITA headquarters as a pivotal location for discussions with the Treasury, which further facilitated reaching an agreement. With the critical deadline of November 11 looming for the submission of the necessary “remedies” to the European authorities, this crucial step aims to secure antitrust approval by offloading specific routes and slots to competing airlines. Furthermore, it’s worth noting that a slight delay beyond this deadline would unlikely disrupt the European Commission’s approval process.
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Tied a reconsideration of financial expectations amid what they termed a “suspected drop in value” of Ita’s assets. However, the decisive negotiation efforts led by Germany seemed to signal a willingness to prioritize long-term collaboration over short-term gains.
This agreement represents a significant step in the consolidation of Europe’s aviation market, with both Lufthansa and Ita poised to increase their competitiveness in the face of ongoing pressures within the industry. As travel demand continues to bounce back post-pandemic, the merging of these two airlines could result in improved services, enhanced route networks, and potentially lower fares for travelers.
Continuing the Journey Together
As we advance towards November 11th, the focus of both Lufthansa and Ita will likely shift toward not only securing the necessary approval but also planning for a seamless integration of their operations and cultures. Mergers are never easy, and navigating the merging of organizational cultures often proves more complex than the legalities involved.
Moreover, with public opinion often swaying in response to such significant changes in the industry, both airlines will need to communicate clearly about the benefits their union is anticipated to bring. Customer concerns regarding service continuity, route availability, and pricing must be addressed head-on to quell any unease among frequent flyers and would-be travelers alike.
the unification of Lufthansa and Ita symbolizes more than just a business transaction; it reflects a broader trend within the aviation sector to dynamically adjust to shifts in consumer behavior and market demands. Whether this marriage of necessity culminates in a successful partnership will depend greatly on the next few weeks as key milestones are met and the new alliance endeavors to chart a successful path forward together.
Stay tuned for further updates as this unfolding story develops—after all, in the world of aviation, the sky is the limit!
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