China Eastern Interested In Buying Alitalia

Alitalia have been struggling financially for some time. While attempts to make the airline profitable have failed, the Italian government is trying hard to sell the airline to avoid any more losses. Last week, we reported that EasyJet had pulled out of talks, leaving Delta and Ferrovie again looking for a third partner. Now, there could be one in the pipeline, as rumours have it that China Eastern are interested in buying a 10% stake in Alitalia.

China Eastern Interested In Buying Alitalia
Alitalia has been struggling over recent years. Photo: Alitalia.

Politics involved

In the 2018 general elections, a new ruling coalition was chosen in Italy. This coalition claims that the stable functionality of Alitalia is one of their most important goals. Last week, Chinese president Xi Jinping visited Rome, where Italy signed a deal to join the China’s Belt and Road (BRI) initiative. Italy and China announced their plans of strengthening their ties…

“…in areas of mutual interest, such as roads, railways, bridges, civil aviation, ports, energy (…) and telecommunications”.

What can be understood by the civil aviation part is the potential for investment from China Eastern in Alitalia.

Why is Alitalia being sold?

After years of turbulent history and a failed investment of Etihad Airways, the airline filed for bankruptcy in May 2017. Later that month, the Italian government announced the nationalization of the airline. Just weeks later, the airline was up for sale as it became clear it could not turn a profit.

In fact, the losses at Alitalia could be even greater than anyone originally thought. Italian newspaper, Sole 24 Ore claims to have seen a confidential document presented to the Ministries of the Economy, Economic Development and Transport.

According to their report, in 2018 total revenues increased from €2,966 to €3,071 million (€3,016 million in 2016). The operating result after amortization and depreciation (EBIT) in 2018 was -€343 million. Compared to -€496 million in 2017 and -€360 million in 2016. It seems that Alitalia has lost over a billion Euros in the last three years alone.

China Eastern Interested In Buying Alitalia
Delta Airlines confirmed their interest in buying a stake in Alitalia. Photo: Alitalia

Who is interested?

Various airlines including Delta Airlines, Lufthansa and EasyJet have expressed their interest in purchasing the Italian carrier. Last week China Eastern accounted its interest as well. Currently, with EasyJet out, we have two Skyteam members and Lufthansa battling for the deal.

According to Reuters, Delta is eyeing a 15% stake in Alitalia, whereas Italian state owned train company Ferrovie are looking for as much as 30%. The government is trying to organize other public companies to join the buyout. Sole 24 Ore reported that China Eastern could spend up to €100 million in exchange for a 10% stake in Alitalia. A partnership between these three could be very interesting to see.

The Italian government seems to want to protect Alitalia from being purchased by Lufthansa. It hopes that a deal with Delta would boost Alitalia’s long haul flight capabilities. It also hopes that Delta would help the Italian carrier in terms of local competition from the likes of Air France-KLM and Lufthansa.