An umpteenth episode of the Alitalia takeover soap opera and now we can say that the Italian airline is starting to feel the pinch.
Reminder of previous episodes
In the 1990s, Alitalia almost merged with KLM, which finally withdrew from the deal and was bought by Air France-KLM in the 2000s. But the offer initially accepted was later rejected by the Berlusconi government, which found the sale price too low.
So it ended up falling into the arms of Etihad as part of the latter’s calamitous development strategy. The romance turned sour and Etihad withdrew, leaving Alitalia with an abysmal debt that led to its placement under safeguard procedure in 2017.
Last February, Delta was the favorite for the takeover at the head of a consortium possibly including easyJet. One month later, there is more talk of a partnership than a buyout. Then easyJet announced it was no longer interested. In April there was talk of an interest from China Eastern, but the deal did not go any further.
In July, a reliable scenario seemed to emerge: 10% for Delta, 35% for Ferrovie dello Stato, 15% for the Ministry of the Economy and 40% for Atlantia, the holding company of the Benetton group.
In the meantime, Lufthansa had expressed interest but did not go any further because it wanted full decision-making power, which is out of the question for the government.
But with Alitalia and the Italian government, nothing is ever simple: in September the government asked Delta to increase its stake. Refusal of the American airline that, in this case, would want more control over the strategy of the airline, something that the government does not want to hear.
Last month it was Lufthansa that came back, offering 200 million euros, but only on the condition that the government restructure the airline in depth beforehand. Besides, Delta maintains its offer at 100M for 10% of the capital.
And while the deadline for choosing a buyer was set for November 21 the whole structure collapses with Atlantia’s decision to withdraw from the deal on the 19th followed by a statement from Ferrovie dello Stato saying that the conditions for the formation of a consortium are not met at this time.
Record losses for Alitalia
Back to square one, while Alitalia has not made a profit for 15 years and is now losing 700,000 euros a day!
Today, the unions are pressing the government to find a solution to ensure the survival of the business, but both sides are in total denial, because if the government holds part of the solution, it is now also a large part of the problem.
The Italian government at the heart of the problem
At all times and regardless of the government in place, even if the current one seems a little more pragmatic than the previous one, the preservation of jobs and the identity of the airline have been the stumbling blocks in all negotiations.
The government wants the majority of the capital to remain in Italian public or private hands and keep as much as possible of the jobs.
What airline partner would agree to invest in this way without having control over the airline’s strategy? None!
This is the reason why Delta does not want to go above 10% (100M) and why Lufthansa has expressed interest in investing in a restructured airline but not in the current Alitalia. And time is running out to find a way out because the business is nearing the end of the different loans it has been granted by the government.
What solutions for Alitalia?
With the withdrawal of Atlantia, the whole mechanism imagined by the directors of the airline collapses. So they have to start from scratch.
A takeover by Delta or Lufthansa under the conditions proposed by the government seems unthinkable. Both sides will give and take: new money yes, but on condition that we hold the reins of the airline.
Lufthansa is clear on the subject and subordinates any investment to the fact that the airline has first been “cleaned up”: this means the sale of a good third of the fleet and the elimination of half the jobs. The Germans, who have proven their know-how in the recovery of airlines, will not pay “to see” that’s for sure.
On the other hand Lufthansa remains open to a “partnership” in the meantime. But that doesn’t address the issue of new money that the business absolutely needs. And it would have a side effect: you can’t see Alitalia being under the wing of Lufthansa and staying in Skyteam at the same time!
A dead end that leads some to propose what would seem to be the only possible outcome: renationalize the airline, knowing that the government does not consider the option of letting the business die.
This is certainly not the end that the government expected, but certainly the only one that is feasible in the short term.
More on this in the next episode.
Photo : Alitalia aircraft wing by Alena Zharava via Shutterstock
