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January 10, 2020

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Dark days for Italy’s Alitalia as options narrow

The future of Italy’s Alitalia looked bleak on Wednesday after state railway Ferrovie dello Stato (FS) and Germany’s Lufthansa pulled out of a rescue attempt for the beleaguered carrier.

“We are on a narrow and difficult road,” Economic Development Minister Stefano Patuanelli told parliament, saying the options to save it were “not endless.”

The government has been looking for buyers for the heavily indebted company for years, without success.

FS had been attempting to form a consortium to save Alitalia, but said on Wednesday it had thrown in the towel after failing to find investors willing to meet the conditions.

Those included having a leading airline play a part in the rescue.

Talks had been underway with American airline Delta, Lufthansa and Italy’s Atlantia, a major operator of motorways and airports controlled by the Benetton family.

But Lufthansa insisted on Tuesday that it was not interested in investing in Alitalia without a major restructuring of the company.

FS head Gianfranco Battisti said the German company had “never formally responded to our initiatives.”

Delta had been ready to invest 100 million euros (US$111 million) and take 10 percent of the capital, which FS said would have resulted in a total investment of 340 million euros over four years.

Atlantia’s participation was “conditional on the resolution of other dossiers,” Battisti said.

That was a reference to threats by the government to revoke Atlantia’s motorways concession following the collapse of a bridge in Genoa in northern Italy in 2018 in which 43 people died.

Atlantia has said it is still interested in finding a solution for Alitalia, but Patuanelli said on Wednesday it was “absolutely unnecessary” to continue talks.

“Alitalia has been in an alarming situation for many years now,” Umberto Bertele, strategy professor at the Polytechnic Business School in Milan, said.

He said one of its main issues was the “imbalance between the number of employees and the number of flights.”

The company has faced extremely fierce competition from low-cost companies, but is too small to be able to really compete with other traditional companies either.

It flew just 22 million passengers in 2018, compared with 91 million for Easyjet, 142 million for Ryanair and some 180 million for Lufthansa and Delta Airlines.

In Italy its market share stands at 14 percent, far behind Ryanair’s 25 percent, and it loses some 300 million euros per year.

FC said it had reached out to some 30 potential investors about an Alitalia rescue, without success.

The best remaining option was for the carrier to “be integrated into a larger company, as was the case for Swissair or Austrian Airlines, which were acquired by Lufthansa, and have a well-defined role,” Bertele said.

That solution would however mean job losses for Alitalia, which currently has some 11,000 employees.




 

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