Since May 2017 the struggling airline, Alitalia, finds itself managed by an extraordinary administration, after a restructuring attempt that was rejected in a plebiscite by a vast majority of the workforce, which resulted in the forced exit of Etihad Airways after the non-fructiferous partnership.
In late 2019, however, as that administration was unable to find potential buyers that could rescue the loss-making airline, the anti-system party (Movimento 5 Stelle) and right-winged extremists (La Lega) led coalition had passed a law appointing a new administration that would inject additional €400M in order to ensure the operationality of the airline until other bids are put on the table. This last move has set on the alarms among European antitrust regulators who doubt the legality of such aid, which would be constituted as legal only if the terms are just the same as in the private market.
Since the 2017 failure of the company (the 3rd in less than 20 years), Alitalia has already received €900M, an amount that is also being scrutinized by EU regulators for similar reasons.
However, this situation is not new for the Italian flag-carrier, which has not been able to report a positive result since 2002 and that, according to analysts, has taken up to €9 billion from public Italian money so far.
Moreover, following a long-standing conservative stance of the different governments, it is unlikely to see more than 50% of foreign ownership of the company, which would mean that potential investors would place large amounts of money in the airline without actually owning it.
The public administration’s idea is that the jobs remain secured, which again shows the statewide symbolism of the company that employs more than 11,000 people. As a note, there are even some areas that partially or fully depend on such employment.
So far, diverse interested investors have decided not to present an offer suggesting an urgent need of deep restructuring. Among those, we find Ferrovie (Italian railway group), Atlantia (infrastructure) and US Delta Air Lines. Nonetheless, they all showed their interest in maintaining talks with the government for future developments.
The German Lufthansa Group, that has shown a fierce interest in acquiring part of the Italian company, has also stressed on the obligation of cutting costs much further, for instance by selling its baggage-handling division – to which the Economic Development Minister Stefano Patuanelli responded: “Alitalia must stay together”. In late December he also declared that the company was losing as much as €2M/per day (depending on seasonality fluctuations).
It is therefore evident that the new company should cut its costs and transition to a more low-cost structure - especially for its small & medium operations - sell some of its aircraft and reduce its operations while focusing on those which are more popular. That would also mean strengthening their long-haul services as they account for more than 1/3 of revenues, and into which little investment has been made (i.e. not buying enough long-range aircraft). All in all, the mistakes of Alitalia include a history of inefficiencies, with costs above its competitors. It is for this reason that its future renders in jeopardy, but at the same time hopeful if the pertinent measures and commitment are put in place.
However, the context cannot be more inappropriate: the recent collapse of Air Italy in a country in which the aviation industry feels constantly non-viable and the coronavirus outbreak that has led the company to reduce 38 both national and international flights due to the weak occupancy rate. For example, the Genoa-Rome connection has gone from a 34% unoccupancy rate to 62%.