Attempts by the Italian government to offload bankrupt flag carrier Alitalia look set to stall just as an impending deadline to repay a huge bridge loan nears. Today, the British low-cost airline, easyJet said it was no longer interested in taking a stake in Alitalia in a joint bid with Delta Air Lines and the government-owned railway company Ferrovie dello Stato.
Alitalia was plunged into bankruptcy in May 2017 after Etihad Airways which owned a 49% stake in the airline withdrew a bailout package because it could not secure agreement with workers over a change to pay and conditions. The then autocrat Italian government kept Alitalia afloat with a loan of more than €900 million but under the condition the airline was offloaded onto a private investor at the earliest opportunity.
Things didn’t quite work out like that when national elections saw a populist government sworn into office. The new government wanted to reassess the sale of Alitalia, taking the view that the airline was an important asset to the country, and even talked about taking a 15% government-owned stake in a relaunched Alitalia.
easyJet submitted an expression of interest in Alitalia last summer but the budget carrier was only interested in taking on the airline’s short-haul routes. It now turns out that after months of talks, the Italian government’s vision for Alitalia did not fit in with easyJet’s strategy.
Several other airlines have already pulled out of the race to take over Alitalia, including the German airline Lufthansa and even Wizz Air. It now just leaves Atlanta-based Delta Air Lines as the sole interested party in taking on Alitalia, alongside Ferrovie dello Stato.
While Delta says that talks are still ongoing, the airline’s chief executive Ed Bastion recently said that no decision had been made and cautioned that the (financial) numbers were “pretty large” and “not the kind of numbers that we’re considering, just to quell any concerns.”
According to sources quoted by Reuters, Delta would only be interested in acquiring a €100 million (15%) stake in Alitalia, while Ferrovie dello Stato has only committed itself to a 30% stake. The Italian government is now searching for other investment partners, although several potential suitors including the government-owned postal service have already ruled out any involvement.
The clock, however, is ticking – Alitalia must pay back the bridge loan by June.
Delta has already taken stakes in other European airlines – Virgin Atlantic and Air France-KLM – so, while investing in Alitalia would certainly be risky (the chronically loss-making airline last turned a profit in 1993), it would at least chime with Delta’s current strategy.
And let’s not forget, if Alitalia were to fail then it would leave the door wide open for Qatar Airways backed Air Italy. While Air Italy has apparently found the market a lot more challenging than it envisioned, it could easily make hay from Alitalia’s downfall. Delta has led a high profile campaign against Qatar Airways and Air Italy, calling the investment a trojan horse to open up so-called fifth freedom flights to the United States.
Delta accuses Qatar Airways of distorting the market because it has allegedly received illegal government handouts that pose an existential threat to American jobs.