The competition for struggling Italian flag carrier, Alitalia is rising. Delta Air Lines is at risk of pulling out of the bidding whilst Lufthansa is ready with a €200 million bid.
Delta backs off competition
On Tuesday this week, we reported that the Italian Government was extending the investment timeframe for airlines willing to take on its carrier Alitalia. The contenders in the bidding up until that point had been American airline Delta Air Lines, Ferrovie dello Stato and Atlantia.
And that’s precisely the reason why Delta Air Lines’ investment bid now hangs in the balance. It’s not willing to raise its investment that high.
The Corriere Della Sera, an Italian language newspaper, said that Delta was only willing to invest:
“…around 100 million euro.”
$112 million is as high as it’s willing to go. Before Lufthansa’s involvement, that may have been enough. Delta has been refining the details of its proposal for many months. But this new competition might force it to completely terminate its investment plans.
But the airline still seems hopeful. Speaking to Simple Flying, a spokesperson from Delta Air Lines said the following:
“Delta continues to work with Ferrovie dello Stato (FS) and Atlantia and confirms it is prepared to invest up to 100million euros for a 10% stake in Alitalia. Delta remains committed to maintaining its partnership with Alitalia in the future.”
However, whilst this might seem like months of effort gone to waste for Delta Air Lines, it’s important to look again at Lufthansa’s proposal. Crucially, it’s not been formally announced yet.
An original Reuters report said that unnamed sources had suggested that the investment was on the cards, but it’s not confirmed. The publication said that a source had identified a letter between Lufthansa and Ferrovie dello Stato asking for a stake in the airline. According to the report, there are still unanswered questions for Lufthansa. Does it really want to be making this investment now?
“In its letter, Lufthansa said it was open to putting in fresh funds to Alitalia but questions remain about its priorities.”
Perhaps Delta has nothing to worry about. Yet. When contacted, Lufthansa declined to comment.
Which bid is best?
Would a Lufthansa investment be better than a Delta investment? This is a critical question.
Of course, the bonus of the Lufthansa investment is that it would inject more funds into Alitalia than Delta’s would. Alitalia is reportedly struggling to stay afloat with just €310 million left in its accounts in September, according to this newspaper.
But, more than money, the Lufthansa investment could also see Alitalia shift alliances. It’s currently a member of SkyTeam but could join Lufthansa among others in the Star Alliance.
Jobs cuts and fleet size
What are the specifics of each party’s bid?
Delta’s latest plan was to cut 2,500 jobs with an aircraft fleet of 103, according to Corriere Della Sera. Atlantia and Ferrovie dello Stato also had similar offers of the table. But Lufthansa is planning to cut way more jobs and operate a much smaller fleet size. It wants 75 aircraft and between five and six thousand redundancies.
The deadline for bids had originally been extended until mid-October but all bids will now need to be in by 21st November. 18 days. Let’s see if Lufthansa makes a formal bid.
Who do you think will get Alitalia running as normal? Let us know in the comments.