ITA Airways improved its finances in 2023 but will face financial hurdles and legal battles in 2024 that will determine its position in the commercial aviation industry.
ITA Airways’ first A321neo (Photo: Airbus)
As ITA Airways strides into 2024, the airline faces challenges and opportunities, grappling with financial losses and legal battles. The outcome of these situations will be crucial in determining ITA Airways’ role in the competitive and dynamic aviation landscape in 2024.
The Italian national carrier, which launched operations in October 2021, taking over from the defunct Alitalia, has had a rocky start financially. In 2022, the Italian airline reported revenues of €1.58 billion ($1.745 billion) and over 10 million passengers, but these figures were overshadowed by a staggering net loss of €486 million ($537 million). The previous year, 2021, wasn’t any better, with the airline accruing €90 million ($99 million) in revenues and an operating loss of €147.9 million ($163 million), despite transporting 1.32 million passengers in two months (since October 2021).
The airline’s performance was significantly hampered by the challenging “startup” phase and a weak market, exacerbated by the ongoing pandemic and macroeconomic factors like the Russian invasion of Ukraine and fluctuating euro/dollar exchange rates.
At the end of 2023, the airline aims to break even operationally, possibly achieving slightly favorable terrain, contrasting starkly with the previous year’s losses.
A pivotal development for ITA Airways is its emerging partnership with Lufthansa. The Italian airline is negotiating with the German carrier to sell a 40% stake, estimated to be worth €250-300 million. The deal, which involves the Italian Ministry of Economy and the German Group, is set to define ITA’s development in terms of fleet, network, and strategic goals.
The preliminary agreement awaits approval from Italian and European regulatory authorities. The pronouncement from the European Commission should not arrive before late spring, with adverse effects on the high summer season of the Italian national carrier. However, the EU Antitrust’s green light is anticipated between late July and early August 2024. The stake sale to Lufthansa is expected to close by the end of 2024, after which Lufthansa can begin managing ITA Airways.
Complicating ITA Airways’ journey are legal issues concerning hiring former Alitalia employees. Nearly 180 ex-Alitalia workers have been waiting for months to be employed by ITA Airways. Despite a court ruling in their favor, ITA Airways still needs to comply with this decision. The case revolves around whether the transition from Alitalia to ITA Airways constituted a transfer of a company branch or two separate operations.
ITA Airways argues for the latter, stating the two airlines are distinct entities. This stance has legal implications regarding the obligation to rehire Alitalia’s former employees. Despite the legal contention, ITA Airways has pledged to follow the court’s decision, aligning with its business needs and plans.
In 2024, ITA Airways will negotiate with several banks for a €300 million ($321 million) loan to finance its fleet expansion. To be guaranteed 80% by the state-controlled Italian trade credit insurer Sace SpA, this loan aims to expand ITA’s fleet from 82 to 95 aircraft by the end of 2024.
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