Alitalia has bought back controlling stake of their frequent flyer program from Etihad for 17 million EUR.
The frequent flyer program was once valued at 112 million EUR, but Alitalia sold 75% of it to Etihad back in 2015 for around 80 million EUR. This means Alitalia has made a profit on the deal of around 63 million EURs, an amazing deal for the struggling airline.
Why did Etihad buy 75% of a frequent flyer program?
Back in 2015, Etihad Airways wanted to follow the Qatar route of building their own air alliance and invest in a multitude of different carriers. These carriers can then be used to feed their long-haul routes, as well as access markets they might not be able to with their flag carriers (Like Qatar and Air Italy).
Struggling airlines make a great deal in the eyes of these Gulf carriers, as all they need is some capital and oversight from an experienced airline to fix their problems. But what has worked for Qatar and Emirates, has not really worked that well for Etihad.
As such Etihad invested in the following airlines:
- Air Berlin, now bankrupt
- Air Seychelles, now restructured and their power diminished
- Indian Jet Airways, who is struggling in the Indian price wars
- Virgin Australia, one of the only successful investments that they share with Singapore Airlines.
- Alitalia, the focus of this article
Etihad also looked at investing into Lufthansa.
Jet Airways, Air Serbia, Air Seychelles, Virgin Australia and Etihad Regional have all used our capital investments to help structure their businesses into more efficient and profitable operations – Chief Executive of Etihad Airways, James Hogan
Etihad originally invested 1.7 billion EUR into the struggling Italian carrier in 2014 for 49% of the company, but it is doubtful they will get much back of that if anything. Alitalia was struggling badly, at one point losing $533,000 USD a day.
In 2017, Etihad tried to invest a massive 2 billion EUR into the airline, but on the condition of a massive restructuring. Unfortunately, the Italian majority owners voted them down and Alitalia was forced to file for bankruptcy.
And what a journey it has been, in the last year since filing for bankruptcy it seems Alitalia is starting to turn things around, to the point that even Delta has expressed interest in acquiring them and their 98 planes.
Why did they buy back their frequent flyer program?
It seems that Alitalia’s plan now is to consolidate as much as possible of its remaining assets that are owned outside of the company, in order to make themselves be as attractive as possible to potential buyers.
— Alitalia (@Alitalia) December 20, 2018
What do you think? Is Alitalia a good buy for airlines or damaged goods?