With the Nov. 21 deadline passed for a binding offer to rescue financially ailing Alitalia, another member of the consortium formed to bail out the carrier has balked at the failure of the Italian government and proposed investors to come to terms on a deal.
Italian state-owned railway group Ferrovie dello Stato (FS ) had expressed willingness to take a 40% stake in the €1 billion ($1.1 billion) bailout of the Italian flag carrier. The FS announcement mirrors that of Italian holding company Atlantia two days ago that conditions were not in place to warrant an investment in a resuscitated Alitalia.
Atlantia has been linked to a €300 million investment in Alitalia in return for a 30% stake.
While unable to agree to terms demanded by the government, both FS and Atlantia have pledged to continue negotiations aimed at closing a deal.
The decisions by the two potential investors place the Italian government in the unenviable position of extending for the eighth time the deadline for agreement to a binding offer to take over Alitalia or temporarily renationalize the carrier.
Stefano Patuanelli, Italy’s economic development minister, stressed in an interview with CNBC on Nov. 20 that terms of any agreement to reboot the carrier needed to take into account the retention of jobs. He previously stressed that the absolute drop-dead timetable for closing a deal is the end of March, at which time all necessary approvals would be secured. Worst case — although still unlikely — is that Alitalia would be liquidated.
The government demand for maintaining jobs at Alitalia adds a Catch-22 element to negotiations. U.S. major Delta Air Lines remains committed to a €100 million investment in Alitalia in return for a 10% equity stake. Delta has pushed back against a request by the Italian government to increase its investment in Alitalia. Delta is mostly interested in Alitalia’s long-haul business; Europe’s short-haul sector is becoming increasingly dominated by low-cost carriers.
German airline Lufthansa continues to be interested in Alitalia, but has insisted that it will not take an equity stake in the resurrected carrier before it has gone through a complete restructuring. As part of any eventual investment in Alitalia, which the Italian government hopes would be greater than the Delta offer, Lufthansa is looking for massive job cuts in the Italian carrier, which has long been accused of retaining a bloated workforce.
Lufthansa has struggled to integrate bankrupt Air Berlin into its Eurowings group.
Privatized in 2008, but under administration since May 2017, Alitalia has not turned a profit since 2002, losing approximately €343 million on €3.3 billion of revenue in 2018 alone. Alitalia is burning through cash reserves in the form of a €900 million state loan and is expected to run out of money by year-end.
Adding to the current tension over the Alitalia bailout, Italian air traffic controllers are staging a four-hour strike on Nov. 25 that will jeopardize thousands of flights on airlines flying to and from Italy. And Alitalia workers have planned a Dec. 13 strike to protest expected job losses emanating from the proposed selloff. Strikes by Alitalia workers during the peak Christmas shopping season will put a further dent in Alitalia’s revenues.
Alitalia has no dedicated freighter aircraft but uses the belly-hold capacity of passenger aircraft for cargo operations.