The turbulent journey of the old Alitalia

2023-06-09T05:23:26.870Z

Highlights: The Italian State sells 41% of Ita Airways to Lufthansa after decades of losses. The deal ends the soap opera about the bankruptcy and sale of the old Alitalia. The German group intends to expand its cooperation with the Italian railway company, Ferrovie dello Stato. The agreement will have to be submitted to the Italian Court of Auditors and the Directorate-General for Competition of the European Commission. The question is whether this will be the definitive move and the old company will put an end to its public nature.

The Italian State sells 41% of Ita Airways to Lufthansa after decades of millionaire losses and the failure of all governments to find a solution to the flag carrier

The story is long and painful. And each of the governments that have passed through the Chigi Palace in the last decade has blamed the previous one. Some, like the current one, have done so even doing exactly the same thing they reproached their predecessors. In this way, the Italian Executive has put an end to the soap opera about the bankruptcy and sale of the old Alitalia – converted into Ita Airways in 2021 – selling 41% of the airline and making it a partner of the German company Lufthansa. "Today closes a path that has marked the history of the national airline with a perspective of integration into an important European airline," Economy Minister Giancarlo Giorgetti said last week. A path of almost three decades.

Lufthansa also announced in a statement that it will acquire 41% of the Italian airline through a capital injection of 325 million euros, with the option to acquire the remaining shares at a later date. Something that would seem quite likely. Giorgetti spoke of "a perspective of integration" in the ministry's note.

In this sense, he presumed that with the Government of Giorgia Meloni, in power since last October, "a knot has been untied that for 30 years has conditioned the air transport market in Italy." "We are convinced that this decision will allow the air market to develop in the interest of Italy," he concluded. In addition, he indicated that to ensure sustainable growth, the German group also intends to expand its cooperation with the Italian railway company, Ferrovie dello Stato, with which it already signed an agreement last February.

The agreement, which will have to be submitted to the Italian Court of Auditors and the Directorate-General for Competition of the European Commission, marks a strategy "shared" by Ita by its two shareholders, the Italian State and Lufthansa. Just two years ago, however, Meloni herself accused Draghi of selling the Italian flag carrier "to the Germans."

Andrea Giuricin, professor of transport economics at Milan's Bicocca University and an expert on air transport, believes that "the sale is good news for Italy." "Especially since alone in the market she would not have managed to get ahead and being part of a large group like Lufthansa will allow her to benefit from its strength. Lufthansa's plan is to boost the long-haul hub in Fiumicino, so it's also suitable for long-haul connections. But the agreement is a first step. We know that it will not be easy even for Lufthansa and that the critical phase will be in the next two years, when the other 50% will be bought by the same group." The question is whether this will be the definitive move and the old company will put an end to its public nature. "Lufthansa has the competence to do all this: they have already incorporated other airlines. So this time the company is expected to go towards a real and complete privatization," says Giuricin.

ITA Airways was founded in October 2021 as an independent airline from its predecessor, Alitalia, which was dismantled after years of trying to avoid bankruptcy. The company had tried before reaching that extreme several mergers – the most notorious with KLM, which ended in a failure and a millionaire fine to the Dutch company – but never managed to form a large group, like its competitors. It maintained staff, lost flights and passengers – in 2020 it had 6.6 million, compared to Ryanair's 52.2 or Lufthansa's 36.4 million – and market share. Today, it is not even able to compete on domestic Italian flights or departing from Italy: Ryanair has 23.2% share, Easyjet 12.3%, Lufthansa 9.2% and Alitalia 7.8%.

In 2017, Lufthansa made an offer, but the workers did not agree. The company began to have a public administrator and the State had to inject since then about 500 million each year. The new plan involved a new investment of 1,350 million for the transformation of the company that, fundamentally, went from having more than 100 aircraft to 52 and reduced its workforce to about 2,800 people. The idea, obviously, was to lighten it so that it could be sold.

The then Prime Minister, Mario Draghi, thus put it on the market. And it was highly criticized by Meloni herself, who considered that this meant the dismantling of Italy's heritage. The main problem then is that all the big groups were coming from a critical financial moment due to the impact that covid-19 had on tourism and airlines. The operation could not be carried out. Meloni and his ultra-nationalist government have now executed him.

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