German carrier Lufthansa said it had offered to buy an minority stake in ITA Airways, betting on reviving the loss-making successor to Italy's Alitalia and expanding its footprint in Europe.

Lufthansa said Italy is the most important market outside of its existing home markets and the US, noting its prominence as both a business and tourism destination.

It did not disclose the size of the stake or the price.

The offer was for a 40% stake in the company, two sources close to the matter said. One of the sources said it was valued at €200-300m. They declined to be identified because the matter is confidential.

The move comes as Europe's airlines have struggled to recover their balance sheets after the years-long Covid-19 pandemic and as legacy carriers have looked to consolidation to help them compete with low-cost airlines.

The cost-of-living crisis in Europe has stirred concerns about softening demand at a time when carriers are also struggling with higher costs of wages, fuel and other inputs.

Italy's Economy Ministry said that Lufthansa was the only bidder. It will now review the offer and decide whether to approve it.

Under the terms of the bidding process, Lufthansa has to ensure it will develop Italy's main hubs and guarantee ITA has access to strategic markets as well as increases its long-haul routes.

The new right-wing administration in Rome passed a decree in December to initially sell a minority stake through capital increases, in order to speed up a full divestment in ITA.

Beside its domestic German business, Lufthansa already operates the brands Swiss, Austrian Airlines and Brussels Airlines.

"The plan is to agree on the initial acquisition of a minority stake as well as on options to purchase the remaining shares at a later date," Lufthansa said in a statement.

It added that it hoped to sign a Memorandum of Understanding with the Italian Economy Ministry and move on to exclusive talks.

Two sources said previously that ITA's shareholders will convene to give a green light to the capital increase once the Italian Treasury signs off on the memorandum with Lufthansa, a process Italy aims to finalise quickly.

ITA in 2021 posted an operating loss of €170m and analysts believed a merger with a stronger rival was the only option left for the airline, seen as unable to survive national and international competition as a standalone company.

Lufthansa became the frontrunner after Italy held talks last year with US private equity fund Certares, Air France and Delta about a deal but failed to reach an agreement.

Air France confirmed yesterday that it would not bid for ITA.

Alitalia was considered a national icon in Italy, and successive governments spent an estimated €10 billion to keep it afloat in its last 14 years of life, despite heavy losses and bad management.

Rome has already pledged more than €1 billion for ITA and under a deal with the European Union, it could provide another €250m this year.

Analysts say it could take a long time before Lufthansa can turn ITA around.

"Acquiring ITA is one of the most challenging propositions in European aviation: the airline has been persistently loss-making," said Bernstein analyst Alex Irving.

"If anything, the backdrop is becoming even more challenging, especially on short-haul, as Ryanair and Wizz Air have added as much capacity to Italy as they realistically can," he added.