Exciting rumors from the world of Aviation; Delta and Alitalia might merge after their executives revealed an upcoming meeting in Atlanta.
Unlike previous talks with Air France and Etihad, both of which lost plenty of money helping Alitalia, this deal might be fully supported by the Italian government, as it would not threaten jobs in the home country.
This means that Delta might beat out the other airlines and investors who are gunning to take over the failing Italian airline.
Why is Delta the front-runner to invest in Alitalia?
There have been a few different possible buyers over the last few months:
- Lufthansa. The big German airline has been interested in expanding into Italy. This deal has potential but Lufthansa has not shown much interest in long-haul operations.
- Easyjet. The low-cost carrier has also expressed their interest in the airline, specifically to help make its short-haul operations profitable. However, part of this deal is Easyjet buying many of the physical planes and reducing the workforce of the company.
- Delta. This deal is the most attractive for the Italian government, as it would mean that Delta would focus on long-haul connections. As Delta has no presence in Europe, jobs would be safe in Italy.
There is also a possibility of the airline being divided up and the various companies forming a joint venture, with different skills being applied to different areas of the company.
Why would Delta want to merge with Alitalia?
To answer this question, we simply need to look at the US aviation market. There are three main carriers (Delta, United, and American), several mid-tier airlines (Alaska, Southwest, and Jetblue) and plenty of alternatives (For example, Frontier). Simply put, its full. The US market is fully mature and it’s becoming increasingly hard for these airlines to grow.
However, Delta might be looking at what some of its international rivals are doing and follow their steps. Specifically, Qatar. Qatar has been investing in a range of foreign airlines to grow their revenue base. Airlines like, China Southern, LATAM, British Airways to name a few. So many that they could potentially make their own air alliance.
One investment by Qatar is a little closer to this topic: Air Italy. Qatar owns 49% of Air Italy and has been using the airline to get around agreements to not increase services to US cities. As the airline is not ‘owned’ by Qatar, technically it is not against their agreements. As such, an investment by Delta into Alitalia might allow them to take the fight to Qatar on their ‘home’ turf.
Additionally, Alitalia is rather attractive itself, with 98 planes, 94 destinations, and 12,000 staff. Cash investment in the airline, plus the management skills to make it grow (which Delta has in spades), could make this deal very lucrative.
What do you think? Should these two airlines merge? Let us know in the comments.