Italy has been pumping cash into perennial loss-maker Alitalia for years, despite European Union rules against subsidizing a national carrier. Other airlines have burned through capital with ownership stakes in the airline – Air France and Etihad – but they’ve been burned and other carriers were gun shy to take over given losses of 2 million euros a day even before things began going down hill for the entire aviation industry.
The Italian government wouldn’t stand up to the airline’s unions, and without lowering costs no one was willing to come to a deal to take over the failed airline.
Now potential suitors, which had included Delta Air Lines, are no doubt grateful the process had dragged on and they didn’t do a deal. Qatar must be glad it didn’t find a way to save Air Italy, and allowed it to shut down last month instead.
There’s no longer a prospect to do any deal by the revised revised deadline of May 31, so the Italian government is prepared to take over the airline itself. They’re betting that the current coronavirus crisis means the European Union won’t push back. Indeed, other countries are expected to provide subsidies to their major airlines as well.
The Italian government is close to taking full control of Alitalia, as the coronavirus outbreak in Europe was forcing it to abandon plans to find a buyer for the ailing national carrier, daily Il Messaggero said on Sunday.
According to the plan, which the report said was already at an “advanced stage”, the government would take control of both Alitalia’s aviation and land operations through a public vehicle, the report said, adding the plan would be implemented “in a short time”.
… Asource with knowledge of the matter told Reuters that Alitalia, which has been struggling for years, was running out of cash, despite an extra 400 million euro injection decided by Rome at the beginning of the year.
…In a separate report, daily La Repubblica on Sunday said Rome was planning an immediate intervention in favor of the air transport industry worth 500 million euros ($555 million)followed by other measures worth 3 billion euros, which would help nationalize Alitalia.
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The Italian government, though, should allow the airline to fail. That’s the only way to hit the reset button on costs and work rules that make it terribly uncompetitive and loss-making even in the best of times in the aviation industry.