*

Lufthansa says Fiumicino has room to grow

*

German airline sees airport as gateway to LatAm, Africa

*

Fiumicino's expansion plan awaits Italian regulator

approval

*

Analysts and investors warn of uncertainties in ITA

investment

By Angelo Amante, Joanna Plucinska and Ilona Wissenbach

ROME/LONDON/FRANKFURT, Oct 11 (Reuters) - Lufthansa's

long-promised turnaround of Italy's ITA Airways,

crucial to help revive the German airline's fortunes, is

interlinked with Rome airport Fiumicino's ability to implement

an ambitious expansion plan.

Struggling with high costs and prolonged delays in Boeing ( BA )

plane deliveries, Lufthansa CEO Carsten Spohr said on Oct. 1

that investing in further international growth - which includes

the agreed purchase of a 41% stake in Alitalia successor ITA -

would help to revamp the hard-hit Cologne-based carrier.

Yet, ITA's prospects are closely tied to those of Rome's

main airport. Fiumicino is still waiting for clearance from

Italian airport regulator ENAC to double its capacity to 100

million passengers annually by building a third terminal and

more runway space.

"One of the reasons that further pushed us to invest in ITA

Airways was the quality of Fiumicino. It is one of the few

airports in Europe that has capacity for growth, both in terms

of terminals and runways," Spohr, who sees the airport as a

gateway to Africa and Latin America, said in July.

Aeroporti di Roma (ADR) is owned by infrastructure group

Mundys, controlled by the Italian Benetton family and equity

firm Blackstone. The airport manager submitted in 2021 an

8-billion-euro development plan for Fiumicino to ENAC, which is

still assessing it.

Some sector analysts are however questioning Lufthansa's

focus on Fiumicino: "They have identified Rome as a hub for

Latin America. But ITA is not as ideally positioned as

(Portugal's) TAP or (Spain's) Air Europa," said Ruxandra

Haradau-Doser from HSBC.

Contacted by Reuters, ENAC did not respond to a request to

comment on the approval process, while ADR declined to comment

on this same issue.

A Lufthansa spokesperson said the success of ITA was not

only dependent on the success of the Roman airport, but also on

that of the Milan catchment area, in Italy's north.

RELAUNCHING ITA

Federico Maria Alberto Caligaris, an equity partner at

advisory firm CDI Global, says the focus on Fiumicino makes

sense while Lufthansa has difficulties at growing its other

hubs.

Andrea Giuricin, CEO of transport advisory firm TRA

Consulting, predicted the airport, which welcomed over 40

million passengers in 2023, would exceed next year the 50

million threshold and grow further thanks to strong

intercontinental and tourist traffic towards Italy's capital.

The airport's lean business model is also attractive: last

year, operating costs amounted to 60% of 2023 revenue against

around 74% in Frankfurt, according to Reuters calculations.

The cost per passenger a carrier must pay when a

medium-range aircraft accesses a main European airport is

between 30% and 90% higher than at Fiumicino, Giuricin told

Reuters.

"On intercontinental flights, Fiumicino is also cheaper:

Frankfurt costs almost double and in general the fees are

between 35% and 75% higher," he said.

Fiumicino, where travellers can view statues and paintings

from the ancient Roman times in a corridor leading to a new

boarding area opened in 2022, won last year Europe's best

airport award from industry body the Airports Council

International.

Yet, travellers feel more could be done to expand it and

improve train connections with Rome, which is some 30 km away.

"The airport is good and beautiful but I'd expect a bigger

one for a city like Rome," said Brazilian tourist Felipe Paiva

as he walked past the Temple of Hadrian in central Rome. "And

transport to the city can definitely be improved."

UNCERTAINTIES

Lufthansa's inability to control Fiumicino's expansion add a

layer of complication to its bet on ITA, whose predecessor

Alitalia faced multiple bankruptcies.

Spiralling labour costs have forced the German airline to

issue two profit warnings this year, with analysts and investors

warning that Spohr's ITA investment was not a silver bullet.

"The plan sounds plausible and rational at first glance, but

there are implementation risks," said Ingo Speich, head of

sustainability and corporate investment at Deka Investment,

which owns Lufthansa shares.

Some analysts also stress that while Rome is a hub for

inbound leisure traffic, the capital isn't the most natural

destination for core business travellers.

Italy's main airport hub "should really be in Milan, which

is where the money is, where the power is, but it's not where

the politics is," said aviation analyst James Halstead.

A source in the government of Prime Minister Giorgia Meloni,

who declined to be named, told Reuters the right-wing coalition

had no objection to further growth at Fiumicino.

The source added Milan's main airport, Malpensa, had a

fairly diversified portfolio of carriers and would retain its

role even if Fiumicino expanded, but added its proximity to

Lufthansa's main German hubs of Frankfurt and Munich could

undermine it in the future.

"Rome is not actually a very good hub for the rest of

Europe," said Halstead. "There may be some opportunities down

into South America, because of the appeal to the (Italian)

diaspora in Argentina and Brazil, but it's a bit out of the way

to attract traffic."

($1 = 0.8958 euros)

(Reporting by Angelo Amante, Joanna Plucinska and Ilona

Wissenbach; Editing by Lisa Jucca)