German flag carrier Lufthansa has revealed that it has agreed with the Italian Government to purchase a 41% stake in ITA Airways. The 41% stake in ITA will be acquired through a capital increase of €325 million ($348mn). The airline group also maintains the option to purchase the rest of the airline outright later.A deal was rumoured to be announced today, with multiple news sources suggesting that Spohr and other senior Lufthansa Group employees had flown to Italy for discussions with the Italian Government.Italy will also payAccording to Lufthansa, the 41% stake in ITA Airways is being acquired through a €325 million ($348mn) capital increase. But it won’t just be Lufthansa paying into the new airline. The group revealed that as part of the deal, the Italian Ministry of Economy and Finance would also commit to a capital increase of €250 million ($268mn). Just yesterday, the European Commission ruled against state aid given by the Italian Government during COVID-19.Lufthansa has had its eyes on ITA for a long time. In the initial round of bidding for the airline, it partnered with the MSC Group to compete against Air France-KLM and Indigo Partners. In the end, Indigo failed to bid for the airline, and Italy chose Air France-KLM as the preferred option. Lufthansa threw its hat back into the ring when these talks led nowhere.Lufthansa also has a wholly owned subsidiary dedicated to Germany-Italy flights called Air Dolomiti, and previously commented that Italy was its “most important market outside of its home markets and the US.”Commenting on the acquisition, Lufthansa Group CEO, Carsten Spohr, remarked,“Today’s agreement will lead to a win-win situation for Italy, ITA Airways and Lufthansa Group. And it is good news for Italian consumers and for Europe, because a stronger ITA will invigorate competition in the Italian market. As a young company with a modern fleet, and with its efficient and expanding hub in Rome, ITA is a perfect fit for Lufthansa Group.He added,“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.”Remaining a separate airlineLufthansa has no plans to absorb ITA Airways into one of its existing airlines. Instead, the Italian airline boasting 4,000 employees will remain its own brand with its own management. This means that it will also continue to operate under the same AOC. However, being part of the Lufthansa Group will have its benefits. The airline will benefit from powerful tools such as Lufthansa’s global sales and marketing channels and central revenue management.SkyTeam Star Alliance?Not mentioned by Lufthansa today is what will happen to ITA Airways’ airline alliance membership. Like its predecessor, Alitalia, ITA Airways is a member of the SkyTeam Alliance alongside failed bidders Air France-KLM. By contrast, the Lufthansa Group is heavily intertwined with the Star Alliance. Austrian, Brussels Airlines, Lufthansa, and SWISS all belong to Star Alliance and use the Miles & More frequent flyer program alongside the group’s other brands.One would imagine that the Lufthansa Group would want ITA to join the Miles & More program and swap SkyTeam for Star Alliance. However, this could also wait until Lufthansa exercises its options to outright purchase the airline.Source: