Is the long-running Alitalia sale finally set for conclusion?

The saga over the survival of Italian flag carrier Alitalia has been a long one. It has struggled along for many years, but it is now 18 months since its May-2017 administration filing and we are only just getting close to a solution with the business only kept flying thanks to government loans that subsequently became subject of an EU State aid investigation. A search for a bidder has been continuously extended, but the latest Oct-2018 deadline appears to have (at least) secured two binding offers and an expression of non-binding interest for investment in the carrier.


Summary:

  • Alitalia has secured two binding offers and an expression of non-binding interest for investment in the carrier;
  • The identity of the two binding offers has not been confirmed by Italian authorities, but are said to be from rail company Ferrovie dello Stato Italiane and Delta Air Lines;
  • easyJet has confirmed that it submitted the expression of interest for the restructured Alitalia.

The identity of the two binding offers has not been confirmed by Italian authorities, who have simply stated they will examine each of the proposals. According to local reports Italy’s state-controlled railway company Ferrovie dello Stato Italiane had stated an intent to make a formal bid and would be a plausible bidder. The other is suggested as being US major Delta Air Lines, a rather more surprising saviour for the embattled European flag carrier.

While a surprise, it does make sense, as Delta looks to safeguard its activities in trans-Atlantic market. It already has an example of this action further north in the Continent with its ‘effective control’ over Virgin Atlantic Airways in the UK and Alitalia could provide a similar model across southern Europe. Delta and Alitalia are already partners within a trans-Atlantic joint venture alongside Air France-KLM. The US carrier remains tight-lipped on the suggestions and has simply said it will “continue to explore ways to work with Alitalia and maintain our partnership in the future”.

While those behind the two binding offers remain undisclosed under likely confidentiality agreements, easyJet has confirmed that it submitted the expression of interest for the restructured Alitalia. The submission, in response to the new government’s ongoing sales process, “is consistent with easyJet’s existing strategy for Italy,” says the airline.

Alongside easyJet, Lufthansa and Wizz Air were said to reportedly interested in aspects of Alitalia prior to the deferral of the sale process into the second half of 2018, but it is clear they would not want the whole airline. The whole divestment of Alitalia has been complicated immensely by the Government’s insistence to sell the carrier as a whole, rather than a sale in packages.

But the big question is why hasn’t the Government been able to enter exclusive negotiations with an investor? It appears that each potential investor for Alitalia either does not meet the Government’s requirements to acquire the carrier as a whole, or cannot reach a middle ground with the Government on some aspect. Therefore, while news of the three offers is a major step forward, without more details it is unclear in what form they intend to support Alitalia’s future and if it can achieve yet another resurrection.

As a CAPA – Centre for Aviation report from May-2018 highlights: “Alitalia has been kept aloft by partnerships in the past, but has also suffered from having too many masters (airlines and politicians). Outright ownership by another airline might have allowed it to import a more profit-focused culture”.

Specifically, Etihad’s investment in the airline may have been questioned by many, but under its influence, Alitalia did attempt to move its brand and product more upmarket to differentiate itself from fierce LCC competition in Italy. But, in spite of this positive influence, Alitalia still proved unable to break its long term habit of annual losses.