ITA-Lufthansa deal sparks further airline merger talk

Lufthansa's bid for a minority stake in Italy's ITA Airways has ignited talk of further potential sector consolidation as the industry seeks to plot a more profitable post-pandemic recovery. Many of Europe's legacy flag-carrying airlines are struggling to compete effectively with budget carriers, hampered by weak balance sheets that could be made more robust by merging with rivals, analysts said. Lufthansa has offered to buy an initial minority stake in ITA, Italy's state-owned successor to Alitalia, it said on Wednesday. "This may be the next step in European airline consolidation," said Bernstein analyst Alex Irving, citing Portugal's national airline, TAP, as a prime target. The Portuguese government, which owns TAP, has said it is considering an outright or partial sale of the business. Lufthansa, Air France-KLM and British Airways owner IAG are potential buyers, analysts said. "We clearly focus on ITA," a Lufthansa spokesperson said. "At the same time, however, we closely monitor consolidation in the European airline market." Air France-KLM and IAG declined to comment. Sweden's SAS, which has been under Chapter 11 bankruptcy protection in the United States since last summer, is also a potential candidate, Kepler Cheuvreux airlines analyst Ruxandra Haradau-Doeser and Bernstein's Irving said.<br/>