Alitalia Rescue Plan Talks Continue After Latest Deadline Expires

At a board of directors meeting on Oct. 15, directors of Italian holding company Atlantia, active in the infrastructure sector, including motorways, airport infrastructure and transport services, reiterated willingness to continue with talks aimed at reaching agreement on a solid long-term business plan for the turnaround of Alitalia. 

That willingness, however, does not represent a formal agreement to invest in the loss-making Italian flag carrier, which has been in administration since May 2017. Talks are ongoing, although the latest Italian government-mandated deadline expired on Oct. 15.

Privatized in 2008, Alitalia has not turned a profit since 2002, losing approximately €343 million ($398 million) on €3.3 billion of revenue in 2018 alone. The carrier reported an uptick in August, carrying more than 2 million passengers, up 0.4% from the same month in 2018, with cumulative year-to-date passenger revenues rising by 2%. In the first eight months of 2019, Alitalia's long-haul operations saw a 4.7% increase in revenues and a 4.0% jump in number of passengers.

Atlantia has been in discussions since July about taking part in a government-planned rescue of the airline. At the same time, state-owned railway company Ferrovie dello Stato (FS) reiterated a similar commitment to the approximately €1 billion Alitalia rescue plan. Atlantia is expected to provide about €300 million of the total amount.

Alitalia has no dedicated freighter aircraft, but uses the belly-hold capacity of passenger aircraft for cargo operations.

In a news release following the meeting, the board stressed that a number of conditions would need to be met before Atlantia firmed up an offer. Conditions include establishing a new entity with participation of a major airline "able to contribute commercial, network, operational, technical and management expertise and that is willing to commit to the implementation of an agreed business plan, in addition to subscribing for shares in the newco (new company)."

Further, according to the news release, any binding offer from Atlantia is predicated on "identification of an industrial partner to take a significant stake in the newco; final definition of the newco's business plan to be agreed and committed to by the industrial partner, which must assume a major role in managing and implementing the plan; conclusion of an agreement with other shareholders on the newco's governance structure and senior management roles; definition of an ownership structure for the newco that would see Atlantia play the role of minority shareholder and, as a result, not involve the company in the newco's day-to-day operations, with the aim of avoiding potential conflicts of interest, given that Atlantia owns close to a 100% interest in Aeroporti di Roma SpA."

Controlled by the Benetton family, Atlantia manages the Fiumicino and Ciampino airports in Rome and the three airports of Nice, Cannes-Mandelieu and Saint Tropez in France.

Atlantia's board stressed the importance of finding suitable solutions for certain related issues before lodging a binding offer. "These include the need for the companies in extraordinary administration to be able to manage the businesses through to completion of the transaction and the necessary organizational turnaround, including appropriate social protections; EU (European Union) clearance for any financing provided to Alitalia; government measures needed to give Alitalia the necessary stability in order to implement its business plan under market conditions." 

The European Commission in April 2018 opened an in-depth investigation to assess whether Italy's €900 million ($996 million) bridging loan to Alitalia constitutes state aid and whether it complies with European Union rules for aid to companies in difficulty. According to reports in Italian media, Atlantia and FS are pushing for a curb on financial and marketing support by regional airports to low-cost carriers as well as a review of fifth-freedom traffic rights.

As previously reported by FreightWaves (www.freightwaves.com/news/italian-government-asks-delta-to-upsize-offer-for-alitalia), the Italian government has asked U.S. major Delta Air Lines, Inc. DAL to up the proposed acquisition of a 10% stake in Alitalia for $100 million to at least 15%. As part of a rescue plan, Delta would become a cornerstone investor, along with FS with a 40% stake. 

Atlantia and FS have been in talks since July with Delta, but on Oct. 15 the two potential investors mentioned neither the U.S. carrier nor German carrier Lufthansa which recently has expressed some interest in the Alitalia rescue after previously stressing that any financial participation would be predicated on massive job cuts and the absence of any Italian government involvement.

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