Alitalia is in the midst of restructuring, since Etihad pulled the plug and stopped subsidizing the Italian flag carrier. Before Etihad pumped money in, Air France lost their shirt on the carrier.
Two months ago it was reported that Delta had submitted a binding offer to invest in the Italian airline. Today Delta has a revenue sharing anti-trust immunized joint venture across the Atlantic with them. (Delta had opposed Etihad’s flying to the U.S., but favored Etihad’s flying to the U.S. through Alitalia, since Delta took a chunk of that revenue as part of an anti-trust immunized joint venture.)
Copyright: jvdwolf / 123RF Stock Photo
Now come reports that Delta and Alitalia executives will meet in Atlanta about a merger. The Italian government — which has been subsidizing the airline to keep it afloat — may favor a Delta deal because it would involve transatlantic cooperation but not domestic job cuts.
Now you know why Delta really wants the US government to prevent Air Italy from flying between the US and Italy: it would mean competition for them, especially if they took partial ownership in Air Italy’s primary competitor, Alitalia. The amazing thing is that American CEO Doug Parker keeps going along with moves clearly designed to benefit Delta at their expense.
The US airline market is mature, but Delta has had a clear strategy for growth: invest in other airlines around the world like Aeromexico, China Eastern, Virgin Atlantic, and more.
@ Gary — It would be amazing to see Bastian make this fatal error.
I don’t think this would be fatal error at all. If Delta takes 50% or less, they can dictate a lot. If Delta makes a purchase, they can dictate everything. Believe me Delta would cut all the waste.
Great news for the Italian government as, presumably, Delta will want to pay back all the subsidies Alitalia has received over the years. After all, we all know just how passionately Delta feels about subsidised airlines flying between Europe and the US 🙂
If they invest in Alitalia it might improve the quality of pasta on Delta flights. That would make the investment worthwhile.
Delta will take a bath and it will be so funny to watch. They’ve already turned China Eastern from the crappiest airline in China to the crappiest airline in Greater China.
The amount of cross ownership and number of antitrust-immune jvs in the airline industry is concerning. Offhand, I can think of no other industries where businesses are so willing to provide capital to their competitors rather than invest in themselves. As the post highlights, Delta is no friend of competition. It doesn’t take much of a crystal ball to see that Delta merging with or acquiring an ownership stake in Alitalia has the goal of controlling capacity, limiting price competition, and taking even more money out of our wallets. Thanks for your loyalty… suckers.
Seems like an odd story — is it even legal under EU regulations? — but regardless, you are smoking something (or are too biased to use good judgment) if you think THIS is the reason DL (and the other major US airlines) oppose Qatar’s subsidization of Air Italy.
I’m surprised you hadn’t spotted or mentioned that earlier. Delta submitted its offer re Alilatlia more than a month ago.
And Delta has problems with two partners (Alitalia and Jet Airways) in financial doggy doo doo. If Jet goes under that’s Delta’s India strategy up in smoke, and if a rival rescues them they could well sever ties with DL. So Bastian probably needs to gamble on rescuing at least one of them if not both. Both are extremely risky. And if it’s AZ expect them to start flying to the likes of BLR and MAA to plug the hole left by 9W.
@USBusinessTraveller I wrote about this November 1, and linked to that discussion, what’s new is the planned meeting in Atlanta
History seems to tell us that investing in AZ would be like lighting cash on fire but only quicker.
This would be two BAD airlines merging into one…
I believe that Delta needs to get their own U.S. turf inflight service in order. I flew business to San Francisco recently and the outbound was service was excellent. The return was horrible. Delta is very inconsistent and when they take on more it makes them a worse airline. Bastian needs to ensure more consistency before taking on a real crappy airline like Alitalia. It is clearly one of the worst in the world and would have Delta management lose complete focus on their mediocre service in their home turf.
From a value strategy, this is a really dumb move. Years ago when a company I was with was closing the Italy office, the manager laughed and told the US VP, “You don’t know anything about Italian labor law””, do you?” For years, Deltas strategy has been about limiting or controlling competition. Just look at the fight with the Gulf airlines. As soon as Delta lost the US Government contract on the Dubai routes, the pulled out. Delta needs to concentrate on their people and their product. A fancy menu doesn’t mean the food is any better.
Delta grew their loyalty by taking really good care of their people and the people took really good care of the customers. Now they are outsourcing more snd more and spinning off the sub companies they formed to reduce costs.
The Airline/Aviation management that built Delta and all the other US airlines are gone replaced by MBAs and Lawyers.
The results are obvious.