Failing airline Alitalia has been urgently seeking a buyer since they declared bankruptcy. Previously we knew that Delta was interested, as was the Italian state railway. But at the last moment, a surprise competitor has stepped in in the shape of European airline giant, Lufthansa.
Alitalia was placed under special administration in 2017, at which point they were losing around €500,000 a day. Administrators have been taking bids for the airline for the last few months, and so far, it looked as if Delta was the front runner.
We knew Lufthansa was interested in expanding into Italy, but this is the first positive step they have taken to secure the Alitalia brand.
The Lufthansa offer
An offer from a major player like Lufthansa isn’t going to come without its caveats. Lufthansa have reportedly placed some tough conditions on their bid, which could be unfavourable in the eyes of Alitalia’s state owner.
Included in the conditions are some major job cuts, pegged by Lufthansa at around 3,000 employees. They also want full control of the airline, with no supervision from the Italian government, and want to own all of Alitalia in the long run.
Lufthansa board member Harry Hohmeister told Reuters:
“We are fighting for the Italian market and that includes Alitalia. We are interested in Alitalia but only if the conditions are right – they have not fundamentally changed,”
Lufthansa have said that the airline will continue to operate independently and with its own branding, but with the backing of the massive Lufthansa Group. They’ve got something of a track record of buying up failing airlines, having snapped up Brussels Airlines and parts of Air Berlin in 2017 to aid their reach into the budget end of the market.
Alitalia for sale
The struggling airline has been looking for a buyer for some time now. Although being propped up financially by Etihad, the Gulf carrier isn’t looking in the best of financial health right now. Their 49% stake in the Italian airline has been becoming a burden.
Their €1.7bn investment wasn’t enough to turn the airline around, and in 2017, they offered to invest a further €2bn, but on the condition of some big restructuring taking place. Sadly, the Italian majority owners threw the idea out, and Alitalia was forced to declare bankruptcy.
In a bid to make the airline more attractive to buyers, Alitalia bought back their own loyalty program from Etihad at the end of last year. At a cost to the airline of just 17m Euros, that’s a clear 63m Euros profit for Alitalia. Not a bad deal, but will it be enough to sweeten the offer to their buyers?
Who else wants Alitalia?
The Italian Government has made it clear that Alitalia must remain a state airline. As such, they intend to maintain their 51% stake in the carrier. So, what’s up for sale is the 49% currently owned by Etihad.
Simple Flying reported back in November that Delta had made an offer for the airline. Their interest in Alitalia comes at the same time as they reportedly looked to invest in struggling Indian carrier Jet Airways. Both bids would certainly be an attempt to make a play for the market share currently cornered by the ‘big three’ Gulf carriers.
As well as Delta, EasyJet apparently made an expression of interest in buying Alitalia. However, this was never formed as an actual bid for the airline, so we can only assume they are out of the running for now.
Ferrovie Dello Stato, the Italian State Railway, apparently also placed a bid for Alitalia. As a state-owned company, they would be a top choice for this government owned airline. Already knowing their operations inside out will make them a clear contender for the bid. They were expected to announce a partnership to run the airline this week, and Delta were the front runners, but will this surprise bid from Lufthansa upset the apple cart?
Lufthansa made their case clear, saying that their strong economic position should be “reason enough for those responsible at Alitalia to think about whether they want to be part of a strong European system or choose another path”.
Do you think the Italian government will consider the Lufthansa bid, or will they stick to their strategy of maintaining their 51% share and operational control?