Does the Alitalia (AZ) drama lead to a happy end at last? In a joint proposal, both Delta and EasyJet have announced their interest in buying into the notoriously financially struggling Italian airline by investing 400 million euros (US$452). This would secure them a 40 percent stake in Alitalia.
However, spending 400 million euros does not suffice for Delta and EasyJet to become joint majority owners, getting access to AZ’s driver’s seat. This, provided their offer is ultimately okay’d by the government and not torpedoed for reasons of nationalistic thinking, which cannot be excluded.
Local market observers speak of a risky undertaking because the heads of the ruling populist party Cinque Stelle and Italy’s far-right Lega Nord want to keep the airline under state control, whatever the costs. The national control is indirectly guaranteed, at least for the time being, by state-run railway company Ferrovie dello Stato SpA and a consortium closely tied to the rail company that continues to hold 60 percent in Alitalia. But unlike EasyJet or Delta they have no experience in running an airline.
Will Alitalia rise like a phoenix out of the ashes?
The cash injection announced by the duo Delta and EasyJet might be the last lifeline offered to AZ to save them from drowning. In addition to the purchase price their advance comprises a further 1 billion euros to keep the bankrupt airline afloat after AZ slipped into insolvency for the second time in a decade, only to be rescued by massive public funding.
For the plagued staff of the airline, many travelers and loyal cargo clients, the announced cash flow sounds promising. They now hope for a rapid agreement and the fast transfer of funds breathing new life into the morbid carrier.
Although a decision was expected to be announced by the end of February, there is still no white smoke coming out of the smokestack of Rome’s Palazzo Chigi, the prime minister’s office. Therefore, all parties involved keep waiting for a final solution in this industrial matter.
Where does this leave Italy’s cargo market?
All these backwards and forwards discussions on who is going to control Alitalia in the future have no mention as to whether they intend it to be the main air cargo carrier out of Italy. The Italian cargo market is still very lucrative and is in the hands of all carriers, except an Italian one.
Milan Malpensa is Italy’s main cargo airport accounting for between 55%-60% of all cargo flown out of Italy. In 2018 the airport handled almost 560,000 tons. Much cargo is transported out of Italy in the bellies of the many foreign long-haul passenger flights to the USA, Far East and South America. There is also a large all-freighter network out of Malpensa which is firmly in the hands of carriers such as Cargolux, NCA, Qatar Cargo, Saudia Cargo, Silk Way West and so on.
Italy has no own cargo carrier - so will a future new AZ set-up also take that into consideration? So far there’s no indication of that happening.
Root-and-branch transformation needed, but will the government consent?
By teaming up, Delta and EasyJet aim to secure a large chunk of Italy’s passenger and cargo market. Both sectors are running strong since years but are dominated by non-Italian carriers. While Rome with its many historic monuments and touristic attractions is a hot spot for leisure travelers, Milan is the place where the cargo music plays. It can be assumed that the UK budget carrier is predominantly interested in the European network served by Alitalia, while Atlanta, Georgia-based Delta eyes AZ’s intercontinental operations, particularly routes between Italy and North America.
But Delta and EasyJet will only be able to reap the fruits of their investment if they succeed in restructuring Alitalia from bottom up. Hard to predict how the battle-tested unions will react to the intended root-and-branch transformation of AZ and a partial downsizing of the carrier’s operations. According to observers these are inevitable measures, including the axing of dispensable jobs, to reduce costs and get the carrier into the black.
AZ losing money since 1999
The unwillingness of the Italian government to privatize Alitalia was the main reason for Lufthansa to step out of the bidding roulette. They were not willing to play second fiddle, risking taking orders from Lega Nord boss Salvini or Cinque Stelle capo Di Maio how to best run the Italy registered airline. Following the insolvency of AZ, LH made very clear from day one that they were only interested in a smaller, restructured new Alitalia. Similar to Air France that had pulled out of the tender process even before.
Now, the cash injection announced by the duo Delta and EasyJet might be the last chance for AZ to get back on their feet and avoid liquidation.