Who will buy ITA from the Italian government?

The process of selling ITA, the airline created from the ashes of the defunct Alitalia and owned by the Italian government, has begun and should be completed in the next few months or weeks. Except in the event of a major surprise, Lufthansa should win the day.

The Italian government’s turnaround

Yet when it came to saving the now-defunct Alitalia, things haven’t gone so fast, and they’ve never been so clear. Over the past few years, we have frequently mentioned the case of the Italian airline and its failed marriages, particularly after the end of its honeymoon with Etihad.

From Air France-KLM to Lufthansa, Delta and Easyjet, the merry-go-round of real or presumed, declared or hoped-for suitors has never ceased, with no end in sight. The reason? The Italian government didn’t want to lose face on the social front, and imposed conditions that made the airline impossible to sell in its current state.

Total turnaround with ITA. The airline is financially “sound”, even if its first months of operation were logically loss-making, it has slimmed down and is now a virtually sound asset. It may also be that the government no longer wishes to continue paying after having constantly bailed out Alitalia, and intends to give it its independence by marrying it as quickly as possible to a reliable industrial partner. Moreover, it has announced that it intends to retain only a minority stake in the airline.

Lufthansa in pole position despite conflicting rumors

As we wrote a few weeks ago, Lufthansa is indeed interested in ITA, and has since officially declared its interest. The German group is to make a joint offer with MSC Cruises to acquire a majority stake (40% for Lufthansa).

However, rumors have been circulating that other players were thinking of aquiring ITA, and were even better positioned to do so, but nothing has materialized to date. How much credence should we give them? In our opinion, almost none at all, for although a certain logic would suggest that Lufthansa is not a natural choice, it is, today, one of the only possible choices.

What other solutions are there for ITA?

Let’s take a look at the various hypotheses that have or could have been put forward.

1°) Air France-KLM

Air France-KLM is a long-standing partner of Alitalia, and today has codeshare agreements with ITA. Both are also members of Skyteam, and in the past the Franco-Dutch group has been a shareholder in Alitalia, sometimes coming close to taking over its neighbor. Alitalia was also a member of the transatlantic joint venture between Air France-KLM and Delta (and now Virgin Atlantic).

Thus, on both sides of the Alps, the media have suggested that Air France-KLM was at one time the favorite to take over ITA. From our point of view, this is indeed the most natural choice, and may even have been desired on the Italian side, but it is totally unrealistic.

A logical choice for the historical reasons mentioned above. It would also be a blow to Air France-KLM if ITA were to move to other partners. This would strengthen a direct competitor, weaken the Skyteam alliance (we can’t see ITA remaining a member if the Lufthansa hypothesis were to become reality) and deprive Air France’s long-haul business of a customer base that has hitherto been fairly captive. It’s not for nothing that when the code-share agreement was signed, Air France executives said they had “a lot of ambition” for ITA.

There’s no denying that it’s more than possible that a mutual interest exists, but that’s as far as things are going to go.

Air France-KLM is prohibited from investing in an airline until it has repaid the state aid it received for the COVID crisis. The same ban applied to Lufthansa until it repaid its subsidies last autumn, while for Air France it would be 2025 at best if all goes well. The Franco-Dutch group is paying dearly here, not for the crisis (everyone was in the same boat) but for its management over the ten or twenty years that preceded it.

The case has been made: exit Air France-KLM, whatever the supposedly well-informed media say.

2°) Delta

The name of the American airline has also been mentioned, and it’s just as logical. On several occasions, it has been a candidate in the rescue of Alitalia, and, like Air France-KLM, is justifiably concerned by the loss of a partner to a major competitor.

We even thought at Travelguys that Delta could act as a momentary substitute for its partner Air France-KLM : by taking over part of ITA’s capital and selling it to AFKL in a few years’ time, when it will be free of its ban, in order toprevent Skyteam from unravelling in Europe andthe end of a code share that’s so important.

Unfortunately, Delta has officially announced that it has no intention of investing in ITA. What’s more, as a non-European airline, it cannot own more than 50% of ITA without the latter finding itself in the problematic situation of IAG.

We remember that it considered an alliance with Easyjet to take over Alitalia, but there’s nothing to show that this makes as much sense for the low-cost airline today.

Exit Delta

3°) IAG

The name was never mentioned, but could have made sense, if only because the Air Europa takeover was aborted. Having an airline in Spain and one in Italy makes a lot of sense for leisure customers.

But as we saw above, IAG has other problems at the moment, and there’s nothing to suggest that it’s interested in Italy, which has never been the case in the past.

4°) The mystery investor

We don’t see any other players in the sector capable of making an offer. China Eastern, another Skyteam partner and Air France-KLM shareholder along with Delta? It would be the least unlikely, but we don’t believe it, if only because of the 50% threshold. So one can dream of a mystery investor like a cruise line or an investment fund, but that’s highly unlikely.

Bottom line

Barring a last-minute turnaround, as we’ve become accustomed to with Alitalia, ITA is set to fall into Lufthansa’s lap, bringing about a major shift in the balance of power in European skies, more important than the airline’s modest size.

Image : ITA by Davide Calabresi via Shutterstock

Bertrand Duperrin
Bertrand Duperrinhttp://www.duperrin.com
Compulsive traveler, present in the French #avgeek community since the late 2000s and passionate about (long) travel since his youth, Bertrand Duperrin co-founded Travel Guys with Olivier Delestre in March 2015.

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