Delta And Alitalia May Merge After Executives Meet For Talks 8

Alitalia

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.

Alitalia
A 49% stake in Alitalia is up for sale. Photo: Alitalia

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.

Boeing’s Vice President of Sales, Ihssane Mounir, with Qatar’s CEO Akbar Al Baker as he takes delivery of Air Italy’s first 737 MAX 8

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.

 

8 Comments

  1. They shouldn’t merge. But, like QR in Air Italy/LATAM, DL should buy out most not still under 50% of AZ, hence they can have a win-win deal with the govt. to save the airline.

    1. They can’t buy more than 49% of Alitalia..due to a law that protects european airlines from being bought by extra european comapanies

  2. Just a thought, if Delta merges with Alitalia, what will the new airline be called, “DELITALIA”???!!!!

    If it is just buying a share into Alitalia, for my two cents, I think Delta will be making a BIG MISTAKE. Alitalia seems to have a history of “sucking the blood” off any airline that tried to rescue it. So many times before, attempts have been tried to “re-invent” and change the course of this airline, and every time, it failed. Every time, more money has been poured into this “Black Hole” of an airline. Anyone who wish to invest in Alitalia would probably do much better elsewhere, in my opinion. Of course, I could be mistaken.

    But then, look back in recent history, AirFrance invested in Alitalia and it did not seem to get any positive returns from it. Etihad invested in it and tried to rescue it, it nearly pulled the Gulf airline down and affected to financial standing of the airline (of course Etihad’s investments in Air Berlin, was also partly to blame).

  3. a big mistake from Delta!!! Alitalia can not survive as long as it has so many employees in Italy who bleed it with so many benefits. and want to be owners of the company and dont do they jobs.

    thinking twice Delta a big mistake!!!!

  4. When Delta bought Pan Am’s European assets in the 90’s it quickly dropped Frankfurt as a hub because it was not profitable. They still had the slots and equipment and employees.
    Thus began Delta’s expansion into Europe. But also was the start of the financial stress that eventually brought Delta to bankruptcy. But we all know how Delta has turned out.

    Delta would be wise to move slowly as the main problem in Italy is the inability to reduce
    workforce. Especially with the companies once owned by the Italian Goverment. Delta has the aformentioned experience in this area and I believe made the changes needed in the Pan Am purchase without much government (German) interference.

    If any priavte sector company can make Alitalia work, my money is on Delta.

  5. This would almost certainly be a terrible mistake for Delta. The existing relationships with Virgin and KLM/Air France would be strained. Alitalia has been a financial basket case for many years. All Delta would accomplish with this would be to anger allies while losing lots of money. Personally, I hold Delta in very low esteem, so I dearly hope they do this transaction.

  6. Delta could buy a 49% stake in Alitalia with Air France/KLM owning another stake of Alitalia to comply with European airline ownership laws. The Italian government likely will have an ongoing stake in Alitalia. Delta and Air France/KLM could restructure Alitalia into a profitable airline by re-aligning Alitalia’s interconnections to the Delta, Air France, KLM and Virgin Atlantic route networks.

  7. Delta has a long history of buying into flag carriers in Latin America, none of which worked out. Alitalia has so many structural problems incapable of resolution. Tjhis would be true insanity. Delta should into the archives of Northwest Airlines who long ago figured out the best way to achieve growth in Europe is through a code-share (NWA – KLM) which involves NO investment.

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