Reports Suggest Air Italy Close To Liquidation – Will Qatar Save It?

Advertisement:

The fate of Air Italy hangs in the balance today as an extraordinary meeting of shareholders has been called to assess the standing of the company. According to Italian media, the situation is so severe that even liquidation of the airline is on the table for discussion.

Air Italy jet in flight
Air Italy could be on the verge of bankruptcy. Photo: Air Italy

Emergency meeting will decide the fate of Air Italy

A shareholders meeting scheduled to take place today will determine the future of struggling carrier Air Italy. The airline posted losses of €164m ($) at the end of 2018 and reportedly finished 2019 in an even worse position. Il Post reports that the airline closed last year with losses of over €200m ($).

If the airline was to go bankrupt, some 1,200 employees would be left without a job.

According to data on Flight Radar, Air Italy has canceled some flights for today and tomorrow. Notably, the Milan-Accra-Lagos-Milan triangle flight is showing as canceled until the 16th February. However, it is not known whether this is due to financial issues or other operational constraints.

What’s the problem with Air Italy?

Air Italy’s leaders had grand ambitions for the airline. Following its rebranding from Meridiana back in 2018, it had its sights set on becoming the nation’s second flag carrier. In fact, the owners of Air Italy were almost banking on picking up the slack that Alitalia would leave behind when it eventually folded. But there was a problem with this strategy.

alitalia
Despite all the struggles, Alitalia still limps on. Photo: Alitalia

Alitalia never did fold, and still hasn’t. Despite struggling to find an investor and continuing to hemorrhage money, Alitalia limps on. Air Italy didn’t bank on this, and now it’s come to a head.

Advertisement:

Added to this is the ongoing impact of the grounding of the Boeing 737 MAX. Air Italy had three in service at the point of grounding, and was expecting some of the additional 17 it had on order to have been delivered by now. This lack of capacity is hampering Air Italy’s ability to expand, and has meant it has kept its older Boeing 737 NGs flying much longer than it intended.

Is Air Italy at risk of bankruptcy?

In essence, the possibility of liquidating the airline is a real risk right now. The losses posted in 2018 and projected to be posted for 2019 are far greater than anything the former Meridiana airline ever posted. Considering revenue in 2018 was only €283m, the significance of Air Italy’s losses are really clear to see.

The ownership of the airline is through AQA Holding, which in turn has its ownership split between Alisarda with 51% and Qatar Airways with 49%. Alisarda is reported by Corriere as not willing to invest any more into the airline, while Qatar is unable to invest, even if it wanted to, as any further stake would take it over the maximum foreign shareholding of 49%.

Advertisement:
Air Italy A330 in flight
Will Qatar step in and rescue the airline? Photo: Air Italy

Qatar could, in theory, pump more money into the carrier. However, without a solid turnaround plan for using the money, this would just be throwing good money after bad.

The one saving grace for Air Italy is the fact that the Italian government really doesn’t like to see airlines go out of business. That’s been proven with the multiple bailouts it has extended to Alitalia. It remains to be seen if the same benefits are extended to Air Italy, and what the outcome of today’s talks are.

Advertisement: