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New Bid For Alitalia: Lufthansa Offers €500 million

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New Bid For Alitalia: Lufthansa Offers €500 million

New Bid For Alitalia: Lufthansa Offers €500 million
October 16
10:32 2017

MIAMI — German flag carrier, Lufthansa, has offered €500 million to acquire bankrupt Alitalia’s fleet, staff, and airport runway slots.

Announced today by the Italian newspaper Corriere Della Sera, the acquisition of Italy’s flag carrier by the Lufthansa Group would cut the majority of Alitalia’s current short and medium-range flights, as well as at least 50% of their 12,000 employees.

Lufthansa’s CEO, Carsten Spohr, said the German carrier has an interest “in a newly positioned Alitalia,” highlighting the fact that the company is not economically viable in its current state.

Alitalia has been struggling to bring positive results for more than a decade since the Italian government intervened and absorbed its long-term debt in 2009. The ‘new’ Alitalia was born with a debt-free status, partially owned by the government and by a group of Italian investors, among which the former owner of AirOne was a big part of.

However, the business model that was adopted by the new administration was not enough to turn Alitalia in a different direction. Etihad Airways came on board and purchased 49% of the airline and, again, tried to revamp the airline’s operations unsuccessfully.

Today, the airline’s crisis is at its peak. Passenger numbers are in decline and so is the workers’ morale even after the Emirati airline invested in new uniforms, lounges, and hard/soft product enhancements.

According to the Italian newspaper, the government considered the conditions of this offer as “too brutal concerning job losses.” Additionally, it is likely that the Italian State Commissioners will reject the offer as Italy wants to sell Alitalia as a whole, avoiding a split of its aviation and ground service activities.

Therefore, Italy’s government has set a new, extended deadline to improve bids on the ill-fated airline, extending it to April 30, 2018. Previously it was set for November 5, 2017.

Likewise, the Italian government extended the deadline for the repayment of the current loan that was given to Alitalia in May for €600 million, standing by for new potential bidders.

Photo: Enrique Perrella • FCO

However, as the airline’s crisis accentuates, a new emergency decree was released for €300 million (US$355 million). With this new loan, Alitalia’s debt to the Italian government escalates to €1 billion.

The new deadline for the repayment of the loan is set on September 30, 2018. Previously it was for November 2017.

Alitalia’s future is now more uncertain than before, even with Lufthansa’s bid on the table. The job cut proposal would be political suicide for the current Italian administration, but this asset sale could be the airline’s ultimate chance to remain afloat.

As things stand, Alitalia should expect to hear more bids from Low-Cost Carriers (LCC) EasyJet and Norwegian. Likewise, several rumors are pointing towards Chinese investors coming in for Alitalia’s assets.

However, Alitalia’s best bet would probably be the Lufthansa Group, Europe’s largest airline conglomerate. The German carrier has saved several carriers in the past, among which Austrian, Brussels, and Swiss Air are the most prominent examples.

The latter was transformed into Swiss Air Lines—a wealthy, well-run carrier which is far away from the dark days that saw one of the world’s most iconic carriers go bust.

The LCC option for Alitalia, however, didn’t move forward after Ryanair backed up from its bid made in September.

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A Global Review of Commercial Flight since 1994: the leading Commercial Aviation publication in North America and 35 nations worldwide. Based in Miami, Florida.

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