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ITA Prepares To Bid For Alitalia’s Brand
The change of the guard between the historic Alitalia and the newly created ITA as Italian flag carrier is less than a month away, but the situation is far from defined. Alitalia is going through its bankruptcy procedure and will stop flying on Oct. 15; on the same date, the new state-owned carrier Italia Trasporto Aereo (ITA) will take over some of its routes and will begin its adventure with 52 aircraft and 2,800 employees, putting it at roughly half the size of its predecessor.
The latest phase of Alitalia’s bankruptcy is quite delicate as the Alitalia brand has been put up for auction, and it will be awarded to the best bidder. The European Commission did not allow ITA and Alitalia to include the brand in the transfer of the assets that built ITA’s skeleton since one of the guiding principles of this operation was the need for a clear break between the old company and the new one. However, ITA could really use Alitalia’s brand: it would save the new carrier a lot of time and money exploiting the awareness that the green, white and red ‘A’ logo already has around the world.
Despite being evaluated approximately 150 million Euros ($175.9 million) on Alitalia’s books, the brand is being put for auction at a starting price of 290 million Euros, plus 22% V.A.T. and related fees. Parties interested have until Sept. 30 to request access to the data room and until Oct. 4 to place a binding offer with a 40 million Euros advance. Should there be no offers during this period, there will be a second auction with no minimum starting price.
Of course, ITA appears to be the most obvious bidder for the Alitalia brand: it certainly has more value to them than to anyone else, but there could be other bidders that may take part in the auction just to deprive ITA of a useful tool like an already established brand and force them to start from the beginning or to push the price higher in order to compel ITA to burn a higher percentage of the 1.3 billion Euros they have available to start operations, from the total of 3 billion Euros earmarked for ITA by the Italian Government.
The most obvious culprit for the predatory operation could be Irish low-cost airline Ryanair, which has already complained many times about the multiple state handouts Alitalia has benefited from in the past.
But the auction of the Alitalia brand is not the only problem ITA has to face just weeks before its inaugural flight. Negotiations between the company and trade unions for the work contract of the 2,800 employees broke down earlier this week, and a strike has been declared for Friday, Sept. 25. The Unions are trying to preserve as many jobs as possible for the almost 6,000 existing Alitalia employees who may or may not be called to join the new ITA, and they are also requesting the same conditions granted at Alitalia to remain in the new company.
A new industrial action, however, is only going to weaken even further a carrier whose operations are winding down and that is already in a very dire financial situation. Italian financial newspaper “Il Sole 24 Ore” reported that Alitalia’s debts towards Italian airports have already surpassed 100 million Euros and have reached “unsustainable levels.” Furthermore, public support for protesting Alitalia’s employees is at an all-time low, as those who will not be able to join ITA will benefit from a very generous arrangement granted by the Italian law that will see them continue to receive 80% of their salaries for up to seven years, with full pension contributions paid by the Italian taxpayers.
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