While Delta has submitted a lowball offer for Alitalia, Lufthansa just wants a partnership.
“Investing is out of the question for us alongside a state-owned entity,” said Lufthansa CEO Carsten Spohr.
That is music to the ears of Lufthansa investors. After Etihad failed to turn the Italian carrier around, Lufthansa wants no financial investment absent draconian government divestment. That just won’t happen. Alitalia and the Italian government are like Siamese twins.
But Lufthansa has invested enormous energy in getting to know the Alitalia leadership. The German airline sees tremendous opportunity in an alliance with Alitalia. Spohr added, “A commercial partnership is on the agenda for the next few months; we know the management team at Alitalia very well.”
Verona-based Air Dolomiti, a Lufthansa regional subsidiary, has pushed Lufthansa to invest more in Alitalia, even arguing that the government maintaining a small stake in the airline might help with negotiations at regional airports.
Lufthansa Profit Warning
Lufthansa also has another worry: tepid profits. It called its investment in former Air Berlin aircraft and routes a deal of a lifetime, but has struggled to effectively use those aircraft over the preceding months. CFO Ulrik Svensson remains optimistic, “Clearly we’re unhappy, but we’re accepting the short-term costs that will translate into long-term benefits.” Even so, Lufthansa’s stock dropped by almost 10% earlier this week and has only partially recovered.
Lufthansa must not forsake its core business to pursue a questionable deal with Alitalia. Let Air Berlin be an early lesson in the dangers of overexpansion.
image: Alitalia
There is a fair amount of business ex-Italy. LH does not want to recreate AZ in having loads of International flights from Italy. LH might want to shuttle these pax to FRA, MUC or possibly ZRH and fly them long haul from there. While it sounds less than ideal, most business people from the north already follow this pattern, leaving little benefit in replicating AZ but huge fixed costs.