Could Italy Finally Kill The Alitalia Brand?

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The European Union is telling the Italian government that the Alitalia brand must not be able to continue if the airline is to relaunch and to receive state funding. That’s the word coming from a European Commission letter obtained by an Italian magazine in early January. Let’s take a look at the details and what this means for Italy’s flag carrier.

Alitalia A320
As a brand and identity, Alitalia has been in existence for 75 years. Photo: Getty Images

The letter to the Italian government

According to Italian magazine L’Espresso, the European Commission has sent a letter to the Conte government regarding its concerns about the relaunch of Italy’s national airline. The EU has the ability to block a government injection of €3 billion ($3.63 billion).

In the letter, it is stated that “The Alitalia brand should not be retained by the NewCo, since it is an emblematic indicator of continuity.” It also asks for the government of Italy to launch an “open, transparent, non-discriminatory and unconditional tender” to shed the old airline’s assets and rejects the idea that these assets could simply be sold to the new company in a private negotiation.

Reuters notes that the letter states that “The NewCo should not retain the combined aviation, ground handling, and maintenance businesses.” Instead, the European Commission suggests that these businesses should be sold separately to a third party. Furthermore, slots must be sold, and the MilleMiglia program in its entirety cannot be transferred to the new corporate entity.

Alitalia 777
Alitalia has endured over a decade of financial difficulties. Photo: Vincenzo Pace | JFKJets.com

Why a new brand matters

Alitalia has been facing financial difficulties for the better part of a decade. This has included a number of restructuring attempts and a €1.7bn investment by UAE carrier Etihad. In fact, Alitalia has been officially bankrupt since 2017, having received an estimated €9 billion in bailouts. The events of 2020 thwarted the government’s plans to sell the carrier, with had seen both airlines and major Italian corporations surface as potential buyers.

It is the legacy of loss-making operations and poor fiscal management that the new airline must leave behind. Indeed, the EU has a point in calling it an “emblematic indicator of continuity” in the letter.

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Alitalia A330
While there were already challenges with finding buyers for Alitalia before the global crisis of 2020, the pandemic has forced the government to fully nationalize the airline. Photo: Vincenzo Pace | JFKJets.com

Should Alitalia loyalty members be worried?

From a passenger perspective, a big concern regarding this letter is the statement that Alitalia’s MilleMiglia program in its entirety cannot be transferred to the new corporate entity.

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This is worrying for Alitalia’s frequent flyers, who may hold status in addition to sitting on a pile of loyalty ‘miles,’ earned over dozens of flights. Hopefully, there will be sufficient opportunity given for MilleMiglia members to redeem their earnings, but this remains to be seen.

What do you think? Is the European Commission’s request to discontinue the Alitalia brand a reasonable request and sensible idea? Let us know your thoughts in the comments.

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