Will Italy Do A Deal With Lufthansa Over Alitalia?

Italy is desperately trying to find a solution to its Alitalia problem. The national carrier is on the verge of bankruptcy and is constantly requiring cash injections from the government to stay flying. But perhaps a deal with Lufthansa is the only hope for a happy ending.

ALitalia rescue
Alitalia is now preparing to meet Lufthansa’s demands to avoid collapsing again. Photo: Alitalia

What are the details?

Alitalia is in a tough spot. The airline has been struggling for well over the last few years (15 years since it made a profit in fact!) and has been on the verge of falling apart at the seams nearly every quarter.

The airline has been struggling due to several factors:

  • International competition on many of their routes from Middle Eastern carriers and other rivals.
  • An old fleet of aircraft consisting of Boeing 777s and Airbus A320-200s.
  • A vast (and perhaps bloated) workforce of highly skilled and paid workers with big pensions. Because of the number of staff, labor costs are higher than they would be with other airlines.
  • To a lesser extent, competition with railway lines for the domestic routes that have become increasingly popular thanks to the flight-shaming movement.

Since covering Alitalia’s struggles for the last year, the airline has seen a parade of different suitors approach the table, from Ryanair and easyjet to Delta and Lufthansa, with each dropping off one by one.

They even all teamed up to work together, but Ailtalia’s conditions for the consortium proved to be a bit too much, leaving them high and dry and looking for another government cash injection. 

The consortium just couldn’t meet with Atlanta’s demands. Photo: Alitalia

Lufthansa steps in

On November 19th, Alitalia received word that Lufthansa was keen to step back in, but not as an investor but rather as a conventional partner. Speaking to Bloomberg, the airline reiterated on this point,

“We have always said that we are interested in a restructured Alitalia. We could also imagine conventional partnerships with Alitalia.”

Qatar Airways, Lufthansa, Investment
It would seem that Lufthansa isn’t super keen on investment, but rather as a partner. Photo: Tom Boon – Simple Flying

But there are some conditions before Lufthansa would partner up with the struggling airline. Live And Lets Fly published the rumors that follow:

  • Lufthansa may be willing to invest up to $177 million USD
  • But Lufthansa demands that Alitalia shrinks its fleet by 30%
  • Alitalia will also need to downsize its workforce by outsourcing its baggage-handling and maintenance teams
  • Lufthansa is also keen for Alitalia to leave SkyTeam and join them at Star Alliance, offering an additional 50 million euros as a sly incentive

Only once Lufthansa has helped the struggling airline rise up will it consider a proper ownership investment relationship. And they better move fast. Not only is the airline racing against its own clock to become profitable, but to beat off the rise of Air Italy, the Qatar owned (49%) airline that wants to become Italy’s home carrier by 2022.

The last demand is quite obvious and something that we have seen airlines ask before (like with LATAM).