Two years after Alitalia declared bankruptcy and various deadlines extended, the Italian government is still negotiating a binding proposal with potential investors, including U.S. carrier Delta. The protracted talks over the rescue of the ailing national airline seem to be reaching the boiling point both among the partners working on a turnaround plan for Alitalia and the carrier’s employees. To express their frustration over the continuing uncertainty, Alitalia’s staff are planning a strike that is expected to result in hundreds of flights to and from Italy being cancelled on October 9, 2019. What could be the last straw to break the camel’s back?
State railway company Ferrovie dello Stato, infrastructure group Atlantia and U.S. giant Delta Air Lines are the only three players left in the game working on the possible relaunch of Alitalia together with Italy’s Ministry of Economic Development. Previously rumored suitors, including British low-costs EasyJet and Ryanair, Germany’s Lufthansa (LHAB) (LHA) , Hungary’s Wizz Air and Air France-KLM, have all dropped their interest in the Italian carrier.
As the Italian government continues to negotiate a rescue plan for Alitalia, the deadline for the consortium to come up with a joint deal, led by Ferrovie, has once again been pushed back – currently to October 15, 2019. Since the parties were not able to agree on a binding offer for the previous deadline of September 15, 2019, the one-month extension is not raising high hopes.
Stumbling blocks
The main issue that the Italian parties seem to be struggling with is Delta’s commitment. The Italian Prime Minister Giuseppe Conte has put pressure on the U.S. carrier to consider increasing its planned investment in Alitalia’s turnaround. So far, Delta has pledged to take a stake of 10% for $100 million, which Conte says “seems a bit low to have a strong business involvement,” Reuters reports. It is estimated that the bid for Alitalia could be worth around €1 billion.
Another sticking point is the development of Alitalia’s highly-profitable routes in North America, which the Italian parties view as instrumental in reviving the carrier and want to see expanded. According to sources cited in a separate report by Reuters, Italian partners are questioning the role that Alitalia would play in the proposed “Blue Skies” transatlantic joint venture with Delta, Air France-KLM and Virgin Atlantic as it may lead to Alitalia having to share revenues from the North American routes with Delta and the two other partners of the alliance. Alitalia is already a member of SkyTeam, as is Delta, Air France KLM (AFRAF) and Virgin Atlantic.
Stirring the pot is Atlantia, expected to take around 35% stake in the revived airline. The company has asked the country’s Ministry of Economic Development to radically revise the rescue plan for Alitalia if negotiations are to go on, expressing its dissatisfaction with the multiple delays and unclear terms in the current plan, Italian news agency Adnkronos writes. Further complicating matters is the fallout of a road bridge collapse in Genoa in August 2018, operated by Atlantia’s motorway unit. The company has threatened to withdraw from rescue talks if the Italian government continues to revoke motorway concessions, IlPost.it reports.
Alive and kicking?
Alitalia went into special administration in May 2017, after the airline’s employees rejected another austerity plan, leading to the carrier’s bankruptcy. The Italian government initially granted a bridging loan of €300 million, followed by an additional €600 million in October 2017, to keep the airline afloat. As the rescue talks drag on, the government has indefinitely delayed the repayment of the €900 million sum and there are suggestions that the carrier may need yet another cash injection of $220 million.
While the airline might be on the brink of liquidation, it continues to operate and even expand, with most recent launch of a new direct seasonal route between Rome Leonardo Da Vinci Airport (FCO) and San Francisco (SFO), to be operated three times weekly from June 2020 on a Boeing 777-200ER, as reported by One Mile At A Time. Alitalia already flies to six U.S. destinations, including Boston (BOS), New York (JKF), Washington (IAD), Chicago (ORD), Miami (MIA) and Los Angeles (LAX), as well as to Toronto (YYZ), Canada. The flag carrier will once again be competing with the second largest airline in the country, Air Italy, which already flies its seasonal route from Milan Malpensa Airport (MXP) to San Francisco (SFO); just as Alitalia, Air Italy also flies to New York, Miami, Los Angeles and Toronto.
Rising tensions
Following a meeting with Alitalia’s commissioners, Italy’s Minister of Economic Development, Stefano Patuanelli, expressed his belief that the binding offer for the rescue of Alitalia could indeed be agreed upon by the October 15 deadline. “The overall situation of the company was examined, and there was an agreement that there are the conditions for a binding proposal to be presented by the buyer consortium by October 15,” Patuanelli was quoted as saying in an October 8, 2019, statement by Reuters. “In this context, we call for responsibility on all sides and speedy decisions, given that the Oct. 15 deadline cannot be prolonged.”
The Minister’s assurance comes at a time as Alitalia’s flight and cabin crews prepare to stage a 24-hour strike on October 9, 2019. The walk-out has been called upon by trade unions frustrated over the ongoing uncertainty in the bailout of the airline and the possibility of job cuts due to restructuring. According to TheLocal.it, around 200, mostly domestic, flights have been cancelled at Italian airports as a result of the strike.