Alitalia's past poses threat to its future; the troubles continue

The current pandemic has put the global economic market in crisis. Many airlines have applied for and benefited from state aid. In particular, some companies, that were already in trouble pre-COVID-19, have been helped (some could even say saved). It is already known that Alitalia, an airline struggling for many years and already bailed out several times, has decided to restart with a Newco, with EUR3.3 billion in funding from the Italian state.

The problem is that the European Commissioner Margrethe Vestager has told Italian authorities that the planned relaunch, which involves splitting the airline’s activities into an old and a new Alitalia, with flight and maintenance activities included in the “new Alitalia,” is not acceptable and asked them to come back with an alternative plan.

The reason for this is that Alitalia has been struggling for years and therefore the new injection of money into the company's coffers will have to follow the normal rules on EU state aid. Indeed, the European Commission noted that Alitalia's financial situation is not linked to the current economic crisis, meaning the temporary flexible rules on state aid introduced by the Commission to help the region’s companies through the pandemic do not apply to Alitalia as the airline was already in trouble before the crisis.

An Alitalia A330 at Miami International Airport. Photo by Karam Sodhi | AeroNewsX

The guarantee of economic discontinuity

To proceed, the Italian authorities will need to demonstrate a separation between the old and new Alitalia through reductions in fleet, routes, and workforce. As proof of this, Italy’s economic development minister Stefano Patuanelli has previously said that long-haul will be one of the areas in which the new Alitalia will need to invest and has said that Alitalia should be operating about 90 aircraft, compared with a previous fleet of 113.

Thorough verification of the assets transferred to the airline and the legitimacy of the aid itself will be carried out by the EU Commission. The new injection of money into the company's coffers will have to follow the normal EU state aid rules.

The company has run out of cash

The Alitalia Rome Fiumicino-New York JFK (AZ 608) flight is the only intercontinental connection operated by the company at the moment. Due to the collapse of air traffic as a result of the coronavirus, flights have been reduced from over 500 to about 50 per day.

However, there is now a partial recovery being put in place. The flight to New York was originally scheduled as a daily service, but Commissioner Giuseppe Leogrande and Alitalia's Managing Director, Giancarlo Zeni, limited the connection to 2 days a week in order to limit costs as the company now has no more money. The €400 million in state aid injected at the end of December is almost fully exhausted.

An Alitalia A330 taking off from John F. Kennedy International Airport. Photo by Andrew Pries | AeroNewsX

Low-cost airlines demand fairness from the government

The AICALF (Associazione Italiana Compagnie Aeree Low Fares - Italian Association of Low Fare Airlines), was established on May 12 by Blue Air, EasyJet, Norwegian, Ryanair, Volotea and Vueling, companies representing over 50% of Italian short-haul air traffic, as well as a significant part of long-haul traffic (Norwegian). These carriers joined together, above all, to amend the relaunch decree, which is currently being examined by the Chamber of Deputies. Michael O'Leary, Ryanair's CEO criticised state aid and in particular the rules of the "Decreto Rilancio" which only support Italian airlines. The companies believe that over the years, low-cost airlines have reached less frequented airports along the Peninsula and have allowed little known and poorly connected territories to grow economically and to enjoy the positive repercussions that the increase in routes, connectivity at low prices, have shown to be able to generate.

It is clear that Alitalia has now reached a stalemate, which will certainly have to be resolved shortly so that it can finally restart and not make the same mistakes of the past. However, its past has not yet been forgotten, as its previous cash injections pose a threat to its relaunch.

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