It is finally Delta that will make an offer to buy Alitalia. But with whom and under what conditions, we still do not know. A look back at a psychodrama that has been going on for two years and the different possible outcomes.
Welcome to Etihad Partners
For almost 20 years, the Italian company has been slowly but surely declining, alternately calling on its government and foreign partners to come to the rescue. This is why Air France-KLM has held up to 40% of Alitalia’s capital. There had even been talk of a buyout, but the deal didn’t go through. Some argue that Berlusconi, prime minister at the time, did not want to see his national company go under a foreign flag, others argue that given the catastrophic management of the company, Air France did not want to go further. If we consider that in terms of a company’s ability to reform, Alitalia is, at the time, Air France at its worst, we can understand the decline of the French company, already incapable of managing itself.
In any case, after a few missed opportunities for marriage, Air France’s stake in Alitalia has continued to be diluted.
But the white knight finally arrived: Etihad, the Abu Dhabi airline, one of the “Gulf Sisters” as the very ambitious golf companies are called,even if they do not form a heterogeneous alliance.
The Emirates company has acquired 49% of Alitalia’s capital for 1.7 billion euros. Air France-KLM did not want to follow the capital increase and is now diluted to 7%.
Alitalia is therefore part of Etihad’s acquisition/partnership strategy, which prefers partnerships and capital relationships to alliances. A strategy that led the Emirati company if not to its loss but in any case in a disastrous situation. After having sacrificed the Air France product by favouring density over quality, a choice that Air France continues to pay a high price for with a notorious lag on its product, Bruno Matheu had struck again. A good partnership is better than an equity investment.
“Etihad Partners” quickly explodes in flight and Etihad decides in 2017 to stop funding a loss maker.
Today this page is still ironically online at Alitalia knowing that the “Etihad Partners” stickers were removed from the planes more than a year ago and that, among others, Air Berlin went bankrupt.
In short, Alitalia found itself exangued and was put into administration in 2017. The State injected fresh money is in a logic of cleaning the situation of the company. Alitalia is therefore living on a drip until it is bought out. And it is the railroad company Ferrovie dello Stato, the local SNCF, which, in addition to being interested in a stake in the “new Alitalia” is responsible for managing the ball of suitors.
Alitalia takeover: many curious, few daring
Between speculations, official declarations and political games, there have been many suitors for Alitalia but few offers. There has been a lot of speculation without any company really committing itself.
– RyanAir: a polite interest
– Air France-KLM: a logical interest for a historical shareholder, even if it seems to have dropped the case years ago;
– Lufthansa: on condition that the Italian State and the public partners are not part of the deal.
– Delta, which like an octopus continues to expand in Europe after the joint venture with Air-France-KLM and ….Alitalia and its stake in Vigin Atlantic.
– Easyjet: the low-cost airline that is positioning itself as the best traffic provider for the majors at their hubs. As long as the majors want to work with it.
The Italian State: a repellent?
Historically, the Italian state did not want to leave its national company under a foreign flag and therefore still has a major role in the company after its acquisition. If nothing is decided today, the idea would be that the State and public players such as Ferrovie dello Stato hold 51% of the capital.
Enough to discourage Lufthansawhose rigor does not accommodate this type of shareholder, especially when one knows its liabilities. And finally only one had both the courage and the financial means to declare itself: Delta.
Delta leads a consortium
But if Delta makes the takeover bid, the American company does not intend to go it alone but rather at the head of a consortium.
The scenario of a two-way deal with Air France-KLM to share 40% of the capital had become a possibility in recent weeks, before it obviously fell apart. Would Air France prefer to concentrate on its own recoverywithout being encumbered by an unreformable partner? Did the current tensions between the two governments get the better of the deal? Whatever the case, it is Easyjet that is being considered today to move forward alongside Delta.
Under what conditions? For which operating mode? Will they co-operate the company or separate the long and medium haul? At Easyjet they are quick not to comment and to say that nothing is done. Yet time is running out. Even if Alitalia’s figures look rather good at the beginning of the year, the name of the buyer, which was initially to be announced on 29 January, will be known in March.
And in the meantime many things can happen. In such an eventful case, it cannot be ruled out that the conditions set by the Italian authorities will end up putting off Delta, which is not the kind of company that leaves profitability aside to please people. And it is hard to imagine that the American company has not scrutinized the heavy past of Alitalia and the failed experience with Etihad and will therefore take all necessary precautions.
On the other hand, if the operation were to take place, it would confirm Delta’s desire to weave its web in the European sky.
An Italian-style drama that will keep us in suspense for at least a month.
Photo: Alitalia by Matheus Obst via Shutterstock
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