so Lufthansa aims to relaunch the company – Corriere.it

The intercontinental expansion of Ita Airways powered by Lufthansa can bring — when fully operational — over 900 million euros a year of additional revenues and 130 million profits. But in the meantime, the 2023 goal of the Italian company will close with losses of less than 300 million euros. this is the red line – according to what the Courier — on which the Ministry of the Economy and within the Italian company are discussing in order to then allow Lufthansa to start the relaunch when it enters, probably in the second half of the year. With the goal of reaching operating breakeven in the first half of 2025. And then recording the first profits the following year.

The negotiations

A demanding relaunch – according to analysts – but possible only with the intervention of a large group such as the German one called to make the -520 million euro red in 2022 forget. In recent days, as anticipated, both Ita and Lufthansa are preparing separately a 2023-2027 industrial plan for the Italian carrier. At the same time, the Treasury and the Germans are at the table for exclusive negotiations which – in the event of an agreement – will see the giant of the skies initially enter with a 40% stake in Ita through a reserved capital increase. If the signing of the preliminary agreement is expected in mid-March, the final act will not take place before July-August with the OK from the EU Antitrust. Only at that point, Brussels sources specify, will Lufthansa really be able to manage the Italian company.

The expansion

But what could the industrial plan look like? The Courier consulted with five industry experts, some of whom have been involved in drafting this type of document in the past. Everyone agrees on one fact: the expansion plan announced last autumn by ITA – which sees the fleet go from around seventy aircraft (including those leased from other companies) to 96 by the end of 2023 – unrealistic, not supported by market numbers and risks sinking the accounts of the tricolor company. Ita can count on another 250 million in public liquidity (after the 1.1 billion already disbursed), net of the investment by Lufthansa for 250-300 million euros.

The aircraft

This is why Ita’s fleet – according to experts – instead of growing by 45% in a year, must rise gradually, reaching 80 aircraft in 2023 and 93 in 2027 but only when certain objectives are achieved. Not only. Already this year twin-aisle aircraft – for intercontinental connections – must become a quarter of the fleet, compared to 20% in 2022, in order to support expansion in particular towards South America and Africa: Lufthansa intends to transform Rome into the fifth hub of the group (which also includes Swiss, Austrian Airlines, Brussels Airlines, Eurowings, Air Dolomiti) as anticipated at Courier almost a year ago by managing director Carsten Spohr.

The sales

Neil Glynn, managing director of the specialized company Air Control Tower, argues that Ita’s aircraft should first of all invoice, each, at least 30 million euros a year, in line with the 2019 performance of Eurowings, Finnair, Sas, Tap Portugal. And the road is still long. Made the comparison on 2022, according to the calculations of Courier, it emerges that each Swiss aircraft recorded almost 55 million euros in revenues, those of Lufthansa on average 36 million, then Austrian Airlines and Brussels Airlines with around 30.5 million. Below that threshold both Ita (21.5 million) and the low cost subsidiary of the German group Eurowings (20.2 million).

The markets

The long-haul fleet, the various experts judge, must serve to strengthen the presence in the USA: the flows, for example, suggest starting direct connections between Rome Fiumicino and Atlanta, Dallas, Philadelphia, while the next flight to San Francisco would be helped by the massive presence in the area of ​​United Airlines which is a partner of Lufthansa (and Air Canada) in the transatlantic joint venture. North America would bring about 165 million euros in additional revenues. Another 150 million would come from expansion in South America. An additional 185 million is estimated as a contribution from Asia. While the new routes in Africa could bring in up to 400 million euros.

The strategies

The expansion of routes in South America, according to experts, would lead to an increase in flows by draining passengers from rival carriers (such as Iberia, Air France, Latam, Tap). Expansion in Africa and in the Persian Gulf, then, would make sense for Ita also given the presence of large Italian companies, starting with infrastructure and energy companies. The strengthening of North American routes would instead help support tourist and high-spending customers who, on the American side, are also more likely to book a seat in Business class or Premium economy.

The synergies

The experts consulted underline that one of the first benefits of Lufthansa, which could already be had in the second half of this year, derives from the presence of Ita flights within the commercial platform of the German group. First of all, the flights of the tricolor carrier would appear on the group’s and United Airlines’ websites, potentially touching over 71 million visitors each month. The synergies on sales and the algorithm developed on tariff modulation would bring further revenues for Ita. Without considering the entry into the joint ventures of Lufthansa – both on the Atlantic and with Asia -, the advantageous prices for the purchase of goods and services, the discounts obtained at the airports.

The budget

At an economic level, the experts set the minimum revenues of Ita at 2.4 billion euros for 2023 to then gradually rise up to 3.5 billion in 2027. Revenues that will initially have to be used to reduce losses: for this year (and with Lufthansa’s action only from August-September) according to the calculations, the profit for the year should be around -307 million euros, therefore just above the threshold of -300 million of the red line. In 2024, net losses are estimated at around 210 million, to be reduced to around 46 million in 2025, the year in which break-even is expected (i.e. revenues equal operating costs). The first net profits should thus arrive in 2026 even, with +31 million euros (+36 million according to Neil Glynn), to rise to +117 million in 2027 (+139 million according to Glynn). All net of external factors with a war, an economic crisis, another pandemic. And above all on the condition that – the experts warn – Lufthansa is able to manage Ita without any Italian political interference.

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