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easyJet Still Wants to Buy “Parts” of Alitalia But Will the New Italian Government Want the Loss-Making Carrier Broken Up?

easyJet Still Wants to Buy “Parts” of Alitalia But Will the New Italian Government Want the Loss-Making Carrier Broken Up?

What does the future hold for the loss-making Italian flag-carrier Alitalia?  Last year, when the airline fell into bankruptcy (again), many analysts expected the then Italian government to sell off the carrier – perhaps broken into different parts.  But times have changed and with a new party in power, officials are less keen on selling off what they see as a national treasure.

In 2014, Etihad Airways managed to broker a deal with the Italian government to take a 49% stake in Alitalia.  Abu Dhabi-based Etihad thought it could do what no one thought was possible – turn Alitalia into a profitable and sustainable airline.  How wrong they were.

Etihad spectacularly failed in turning around Alitalia’s fortunes.  A last-ditch plan to pump $2.2billion USD into the struggling carrier relied on Alitalia’s employees accepting swinging pay cuts and redundancies – an offer they unanimously rejected.  Etihad cut its losses, itself reporting a $1.52 billion loss on the back of its failed investment strategy.

The Italian government was forced to step into the breach – offering up a €400 million bridging loan at the expense of taxpayers in order to keep the airline flying and protect the 12,000 workers at the national airline.  The government has been forced to increase that loan several times.

Since its founding in 1946, Alitalia has only once turned an annual profit – that was back in 1998.  During its existence, Alitalia has lost billions of dollars.  Some estimates suggest the Italian government has spent some $7 billion since the 1970’s keeping the national airline flying.

Some of Europe’s largest airlines, however, have expressed an interest in saving Alitalia from bankruptcy – but only on their terms.  Low-cost airline, easyJet as well as Lufthansa and Wizz Air have all submitted ‘expressions of interest’ in taking on the carrier – at least in parts.

For its part, Lufthansa said it would only put in a solid bid for Alitalia if it could make some pretty significant cost savings.  In a letter sent to the then Italian industry minister, Lufthansa’s chief executive, Carsten Spohr, said “a considerable amount of work” still needed to be achieved before he could progress talks.

At the time, Spohr indicated that he wanted to move ahead before a national election – but that has already come and gone.

And now Italy’s new transport minister, Danilo Toninelli – part of Italy’s populist, nationalistic government – says the Italian State should own at least 51% of the new Alitalia “but with a strong investor next to it who has a mission to fly planes, because (Alitalia) needs to return to being a true flag carrier”.

That could throw easyJet’s plan to just cherry pick the parts of Alitalia it wants out the window.  Nonetheless, in an interview with Italian newspaper, Corriere Della Sera, the budget carrier’s chief executive said his airline was still interested – although, they hadn’t yet had the opportunity to discuss their idea with Toninelli.

easyJet’s bid is seen largely as a way to compete with rival Ryanair who has already acquired a significant market share in the country.  For now, though, Italian taxpayers continue to pick up the slack and that’s unlikely to change anytime soon.

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