In the aviation industry, an industry which by its very nature seems to be detrimental to the environment, the pursuit…
Alitalia’s Rescue To Enter A New Phase
The struggle for survival Alitalia has been going through for the last two-and-a-half years has just got considerably longer. The November 21 deadline for a rescue plan, the eighth deadline that had been set by the special administrators running the company, passed by without any proposal being put forward by the consortium interested in the operation.
The companies supposedly willing to undertake the daunting task of bringing Alitalia back to profitability were Italian state-owned railway operator Ferrovie dello Stato, private airport operator Atlantia (part of the Benetton group and running Alitalia’s hub of Rome Fiumicino), and an industrial partner that was supposed to be Atlanta-based Delta Air Lines. However, Delta was planning to invest only 100 million euros in equity in the operation, an amount that was considered too low by Atlantia and Ferrovie dello Stato to support a proper turnaround plan for the ailing carrier.
Many weeks of negotiations and the interest of German carrier Lufthansa did not modify Delta’s intention since Lufthansa was not ready to make an equity investment but only to sign a commercial partnership that would see Alitalia leave SkyTeam and become part of Star Alliance. Lufthansa was willing to commit to an equity investment but only after Alitalia was downsized from 118 aircraft to 78 and more than 5,000 employees of its current 22,000 workforce were laid off.
After the November 21 deadline, both Atlantia and Ferrovie dello Stato issued public statements confirming that “basic conditions for their intended investment in Alitalia had not been met and therefore a rescue plan could not be presented.” The Italian flag carrier is now burning close to 1 million euros a day and will likely run out of cash without the approved bridge load of 400 million euros set aside by the Italian government to see the company through the implementation of the new plan. But without a plan to be implemented, the bridge loan cannot be dispensed.
Now the Italian Government is faced with the task of selling a company that nobody seems to want in its current form and, according to various reports appeared during the last few days in the Italian press, the next move will be to request the resignation of the three special administrators who have been running the company since May 2017, when it filed for bankruptcy protection under the Italian law, and the appointment of a new manager who will be assisted by an industry expert and will take care of breaking down the company into more saleable pieces.
Financial newspaper Milano Finanza has hinted at Michael Kraus as the expert who will oversee the operation: Kraus worked at Italian carrier Air Dolomiti’s turnaround plan between 2012 and 2014 and the carrier is now 100 percent owned by Lufthansa, therefore the German carrier appears to be in pole position for being the next industrial partner of Alitalia. The administrator is allegedly going to spin off Alitalia Handling and its approximately 3,200 employees, as well as Atitech, the maintenance arm of Alitalia, together with its further 1,000-strong staff. This would reduce employment numbers close to the levels indicated as acceptable by Lufthansa, but further reductions will be necessary as 30 aircraft will need to be disposed of as well.
This solution seems to be favored by the Government party M5S, but is likely to be opposed by the very powerful unions within Alitalia which have already announced a strike for Friday, December 13. Lufthansa seems to be ready to invest up to 200 million euros to build equity for the new company, but this is conditional to reducing fleet and employment levels first. Italian newspaper La Repubblica speculates this new transition period will last between six months and a year, for which the 400 million euros bridge loan already approved by the Government may or may not be enough.
A new phase seems, therefore, to be opening for Alitalia, whose destiny is still hanging by a thread given its dire financial situation. The handling and maintenance units earmarked for spinoff are generally believed to be viable businesses and should attract several interested buyers in a relatively short time. Then it will be Lufthansa’s turn to enter the scene and try to sort out the flying part of the business, there were throughout the years many, including Etihad Airlines, have miserably failed.
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