Before the pandemic Alitalia was losing 2 million euros a day. One financial backer after another has lost their investment. Air France walked away, and then Etihad came in to subsidize the carrier before it, too, lost its shirt.
The Italian government took over funding the carrier, and started looking for a buyer. At one point it looked like Delta, which had had a transatlantic revenue-sharing joint venture with Altialia (so was happy to see a Gulf carrier’s subsidies), would take over management of the airline. Lufthansa sniffed around, too.
But there wasn’t enough government subsidy and there was never willingness to deal seriously with labor costs, union work rules, or the way the airline has been a political plaything for powerful interests for decades.
In 2017 they filed bankruptcy in New York, days away from being kicked out of New York JFK over unpaid bills and having their U.S. phones turned off.
At the end of the day there was no one to rescue Alitalia but the Italian government, which took on even greater urgency due to the pandemic. The European Union – which has rules on state aid to private firms – allowed this, but it had to be a separate and arms length new business that was being launched by the Italian state.
As a result, Alitalia would cease to exist as an airline on October 15 and ITA would be born.
ITA gets about $1.4 billion over the next few years from the Italian government. It will initially operate 52 aircraft (including 7 widebodies), and retain 85% of Alitalia slots at Milan Linate and 43% of Rome slots. It will only start with 30% of the employees that Alitalia had.
Alitalia has had to refund tickets (both paid and award) for travel after October 14. And it’s been unable to say anything to frequent flyers about what happens to their miles. ITA will buy some of the airline’s assets, like planes. These already have the Alitalia logo on them. It would sure be helpful if this new airline could be called Alitalia…
There have been plenty of stories about the end of the Alitalia brand over the past few weeks. But not so fast! Replacement Italian state airline ITA is going to be allowed to buy the Alitalia brand before it launches next month. They still won’t, however, be able to acquire the frequent flyer program so loyalty program members get the short end of the stick.
Italy’s new state-backed airline, Italia Trasporto Aereo SpA, will seek to buy the Alitalia name in time for its start of service in mid-October, according to people familiar with the matter.
A market-price auction of the brand was outlined in a decision released Friday by the European Commission. It’s one of the measures required in order to consider ITA a separate entity from the 74-year-old Alitalia, which is being wound down after losing money for decades. The sale of the iconic name could take place as soon as next week, said the people, who asked not to be named because the plans aren’t public.
To be sure, ‘other buyers’ will have an opportunity to bid for the Alitalia name, but – other than trolling – what would be the point?
Meanwhile Europe has also ruled that Alitalia’s past government subsidies were illegal, and so those funds need to be repaid. How exactly do they think the Italian government will collect? This is genuinely funny.
Alitalia has to repay state aid, but capital injections given to successor Italia Trasporto Aereo (ITA) are in line with market conditions, the European Commission ruled on September 10, 2021.
Alitalia will cease operations on October 15, 2021, passing the baton to ITA. The Commission said two loans granted to struggling flag carrier Alitalia by Italy in 2017, totaling €900 million ($1.1 billion), are illegal under state aid rules.
“Italy must now recover this amount from Alitalia,” Commissioner Margrethe Vestager said in the ruling.
Alitalia, the perennial basket case, will live on – albeit time will tell if that’s merely in the same way that there is still an Eastern Airlines.