No Finish Line Yet In Sight For Alitalia

An Alitalia 777-200 at New York-JFK (Photo: AirlineGeeks | Ben Suskind)

Those who were looking forward to another episode of the never-ending saga of Alitalia and its quest for survival will have to wait a bit longer. The deadline for the presentation of a binding offer and commercial plan for the Italian flag carrier, that has been operating under bankruptcy protection for over two years, was supposed to be September 15, but it is likely going to be extended to October 31.

The first rumors about this extension started circulating at the end of August when a meeting scheduled in Atlanta at the Delta Air Lines headquarters to define the blueprint of the agreement was postponed without formal explanations. The meeting was supposed to include Delta Air Lines, Italian state-owned railway company Ferrovie dello Stato, airport operator Atlantia and the Italian Ministry of Economy and Finance. These are the parties that have expressed an interest in becoming shareholders in the new Alitalia.

According to various sources in the Italian press, there are multiple matters of contention that need to be solved before a working agreement can be found. First of all, the Italian stakeholders would like Delta Air Lines to increase its investment above the 100 million Euros committed in the preliminary stage, which would see the Atlanta-based carrier hold a 10 percent minority stake in the company.

It appears that Delta is not opposed to the hypothesis in principle, but it is asking for at least one third of the key management positions in the new airline: the matter is very political, of course, and since a new government has just been formed in Italy, decisions on this matter cannot be taken before the new people in charge are brought up to speed with the negotiations.

There is also the key issue of Alitalia’s position in SkyTeam, in particular, its position in the new immunized transatlantic joint venture including Delta, Air France/KLM and Virgin Atlantic. Alitalia is not formally part of the joint venture but, according to the financial newspaper Il Sole 24 Ore, it could become a second-level partner through a special agreement with Delta.

The joint venture would distribute profits on transatlantic routes based on capacity, and this would make the small Alitalia a marginal agent should it become part of the mix by itself. However, the solution envisaged would see Alitalia and Delta constitute a unique entity in the joint venture, with the profit-sharing between the two carriers governed by a separate bilateral agreement.

This special relationship would, however, put Delta firmly in control of Alitalia’s transatlantic route development, which could stifle the Italian carrier’s desire to increase its services between its Rome Fiumicino hub and the United States, since they are among the most profitable for the carrier. Alitalia has recently started scheduled flights to Washington Dulles and next summer is planning on opening a new link towards San Francisco, as well as launching a new destination (most likely Atlanta) and increasing frequencies on the existing Boston Logan and New York JFK routes, says Italian newspaper Corriere della Sera.

The extension to the September 15 deadline has been formally requested by the Board of Ferrovie dello Stato in conjunction with Atlantia. The decision needs to be taken by the newly appointed Minister of Economic Development Stefano Patuanelli, but given the proximity of the date and the current situation, it appears a foregone conclusion that the extension will be granted, even if the three commissioners currently running Alitalia during this period, Luigi Gubitosi, Enrico Laghi and Stefano Paleari, would prefer a 30-day extension rather than a six-week delay to the end of October.

After all, it’s the end of the summer, and the carrier still has cash to continue operating without problems until the end of 2019, as there are still 400 million Euros on the company’s accounts, says Corriere della Sera, but winters can be brutal and the frail Alitalia might not be able to survive another postponement.

Vanni Gibertini

Vanni fell in love with commercial aviation during his undergraduate studies in Statistics at the University of Bologna, when he prepared his thesis on the effects of deregulation on the U.S. and European aviation markets. Then he pursued his passion further by obtaining a Master’s Degree in Air Transport Management at Cranfield University in the U.K. followed by holding several management positions at various start-up carriers in Europe (Jet2, SkyEurope, Silverjet). After moving to Canada, he was Business Development Manager for IATA for nine years before turning to his other passion: sports writing.
Vanni Gibertini