Lufthansa Still Has Its Eye on Alitalia

Lufthansa Group is still interested in adding Alitalia to its roster of airlines but remains coy over a potential deal for Norwegian.

The German company submitted a bid for the Italian flag carrier in April, along with UK carrier EasyJet. Alitalia entered insolvency proceedings last year and remains operational largely because of a $1.05 billion ( €900 million) loan from the Italian government. This is due for repayment in December and it seems likely that the airline will have a new owner by then.

Lufthansa’s bid comes attached with certain conditions and would see the Italian airline radically scaled back.

“Italy is a very important market for us. We have handed in a concept to the Italian government on a much smaller, much more focused airline with heavy cost reductions. But before that is being made, there is nothing new to report from the Italy front,” Chief Financial Offer Ulrik Svensson said on an earnings call after the release of Lufthansa’s first-half results.

While Lufthansa remains a contender, Italy’s new populist government is making noises about keeping some of the airline in state control.

Earlier this month, Italy’s Transport Minister Danilo Toninelli said he wanted to keep 51 percent of the airline in Italian hands.

Norwegian interest

Svensson had less to say on any potential move for debt-laden Norwegian. Previously, CEO Carsten Spohr told Germany’s Sueddeutsche Zeitung newspaper that Lufthansa had been in contact with Norwegian but Svensson declined to elaborate on whether anything more concrete had taken place.

“In terms of Norwegian, clearly, we are a supporter of the European industry being consolidated. I think Carsten Spohr said it very nicely at some interview, everybody speaks to everybody in this industry, but we have nothing special to report there,” he said.

If Lufthansa does decide to make a formal approach for Norwegian it will likely find itself up against IAG, the first airline to publicly declare an interest. Norwegian CEO Bjorn Kjos recently said other parties were also keen.

First-Half Results

Lufthansa reported a 0.1 percent fall in revenue to $19.8 billion (€16.9 billion) for the six months to the end of June with net profit up 0.7 percent to $793 million (€677 million).

Lufthansa said it managed to mitigate higher fuel prices but that the cost of integrating aircraft bought from Air Berlin had depressed earnings.

“With continuing strong demand, we are confident that, despite a challenging prior-year basis for comparison, we will be able to report solid revenue trends for the second half of 2018, too,” said Svensson.