Italy to loan Alitalia $650M as it seeks buyer
MILAN — Struggling Italian air carrier Alitalia entered its second period of bankruptcy protection in a decade on Tuesday with the government approving a 600 million-euro ($650 million) bridge loan to keep the airline operating as it seeks a new buyer.
The move came after the Alitalia board acknowledged the failure of a governmentbrokered relaunch plan, which workers overwhelmingly rejected despite softened job and salary cuts, out of concern it lacked a realistic strategy to revive revenue.
The plan’s failure blocked a planned $2.2-billion investment from both managing shareholder Etihad Airways, with a 49-percent share, and a consortium of Italian investors that controls a 51-per-cent stake.
Economic Development Minister Carlo Calenda said the goal in the short term is to seek buyers while protecting service, routes and workers and “spending as little government money as possible.” The Italian government named three administrators — Luigi Gubitosi, Enrico Laghi and Stefan Paleari — to see Alitalia through a sixmonth period of reorganization.
Alitalia has lost competitiveness as the European aviation market has been liberalized, suffering in particular under competition from low-cost carriers. Its failure has previously been staved off by government interventions.
Analysts, however, say it may be difficult to find another suitor, making the prospect of liquidation more likely than in past crises as the government may lack the political will to ensure the carrier’s survival as a standalone entity.
“There is an air of inevitable disaster,” said airline analyst Gregory Alegi, who teaches at Rome’s LUISS University. “We could see something like Austria Air or Swissair, which ended up in the Lufthansa world but much slimmer and trimmer.”
Milan Polytechnic University finance professor Marco Giorgino said any potential buyer “needs to understand the reality of managing a company with high debt that has lost market share and with high operating costs.”
In lieu of a buyer to take over the company, the government-appointed administrators could consider selling off pieces of Alitalia.
Alitalia has emphasized that its flights are operating on schedule heading into the summer tourist season. Alegi said the airline was unlikely to suffer an immediate loss of bookings since much summer travel was already scheduled. However, the company may run into trouble booking longerterm travel and with group operators.
“Would you buy a ticket now for an operator that may not exist in six months?” Alegi asked.
Alitalia filed for bankruptcy protection in 2008 when it was still state-owned, but avoided liquidation when then-premier Silvio Berlusconi organized a group of Italian investors to step in during a privatization process. Etihad took a 49-per-cent stake in 2014.
Etihad Aviation Group CEO James Hogan said in a statement Alitalia needs “fundamental and far-reaching restructuring to survive” and made it clear the Abu Dhabibased airline is not prepared to continue pumping money into the Italian company.
Hogan said Etihad’s involvement delivered “significant improvements” early on. He blamed “marketplace challenges,” including competition from budget airlines and the effect of terror attacks on tourism, for Alitalia’s continued struggles.