This article investigates the short-term impact of the Alitalia–ITA Airways transition on pricing strategies and market competition in the Italian domestic air transport sector. Using a novel dataset simulating over 21,000 ticket purchases before and after ITA’s market entry, we apply a difference-in-difference approach combined with propensity score matching to estimate the causal effect of this ownership transition. Our results show a significant fare reduction of approximately 25% on affected routes, driven by ITA’s more competitive pricing and reduced intertemporal price dispersion. The study also documents heterogeneous reactions among competing airlines, particularly Ryanair. These findings provide new empirical evidence on how structural changes in flag carrier ownership affect market dynamics, raising important considerations for competition policy and future regulatory design.