Alitalia Gets Massive New Cash Injection From Italy

Filed Under: Alitalia

Alitalia has just secured an additional three billion Euros in funding from the Italian government.

Alitalia gets new cash injection

Reuters is reporting that the Italian government will be injecting a further three billion Euros worth of capital into Alitalia, as there are plans for the airline to be nationalized. This is according to Italy’s Industry Minister, Stefano Patuanelli. This comes after an announcement in mid-March that Alitalia would be getting 600 million Euros in funding.

We’ve known that the plan is to launch a “new” Alitalia in June 2020, though it increasingly looks like the new Alitalia will likely look a lot like the old one, except maybe slightly smaller.

Alitalia furloughing over 6,600 workers

The news of the new cash injection comes as Alitalia has allegedly reached an agreement with unions for 6,622 employees to be furloughed through October 31, 2020.

About half of the employees are in-flight staff (pilots and flight attendants), while the other half are ground based employees. With this arrangement, employees will receive up to 70% of their salaries during the period without working.

This represents roughly half of Alitalia employees, and given the slow anticipated recovery, this seems to make sense.

Alitalia will focus on long-haul & alliances

Italy’s Industry Minister revealed two further points when discussing the “new” Alitalia:

  • The airline will focus heavily on long haul routes
  • The airline will focus on a new transatlantic alliance

That last point is an especially interesting one. Alitalia was recently kicked out of the SkyTeam transatlantic joint venture — a joint venture between Air France-KLM, Delta, and Alitalia, was swapped for a new joint venture between Air France-KLM, Delta, and Virgin Atlantic.

There has been talk of Alitalia leaving SkyTeam and joining another alliance, though one has to wonder what exactly that might look like:

  • Is there room in the oneworld transatlantic joint venture, which currently includes American, British Airways, Finnair, and Iberia?
  • Is there room in the Star Alliance transatlantic joint venture, which currently includes Air Canada, Lufthansa Group carriers, and United?

Both scenarios don’t seem particularly likely to me, especially in light of current circumstances, and especially without an equity investment from a participating airline (which seems virtually impossible at this time, given circumstances).

What else could Alitalia be considering that I’m not thinking about?

Bottom line

Alitalia is getting a massive cash injection from the Italian government, and is also furloughing about half of employees through October.

What I’m most intrigued by is Alitalia’s plan for transatlantic partnerships. What exactly could we see them pursue outside of SkyTeam?

What do you make of these developments from Alitalia?

Comments
  1. There should be a fourth alliance. I really liked the idea of Etihad partners and think it is sad that is has been abandoned. The Etihad alliance was quite global (with the exception of the Americas) and if properly managed could have been a good contender. Anyway, I don’t see Alitalia moving to another existing alliance.

  2. This is great news!! Continued competition on the NYC-FCO route is essential, since Norwegian won’t be flying it anytime soon.

    I’m thinking that they will join Star Alliance. They have been in discussions with Lufthansa

  3. First of all can I just ask why the hell is Italy’s Industry Minister being put in charge of Alitalia? Governments know nothing about running airlines and if the Italian government here is thinking that Alitalia will become profitable if they swap partnerships with SkyTeam airlines, can I just say THE PROBLEM IS IN ALITALIA, NOT ITS PARTNERS!! Why hasn’t Ryanair filed a complaint with the European Union over illegal state aid yet?

  4. @ Samuel:

    The “Etihad partners” concept and acquisitions were exactly the replica of Swissair’s disastrous “Qualiflyer Group” in the 1990’s, and as such it of course produced the same results. The only difference was that Etihad, having owners with very deep pockets, did not disappear as Swissair did.

    Add to this that Alitalia’s 3 billion euros will probably be lost in mismanagement before a few years, that lawsuits and political “combinazioni” will reduce the number of employees made redundant, and that the airline will probably find itself in the exact same situation as now and before.

    Alitalia has died and was reborn so many times that it could rename itself “Phoenix Airlines”, nothing to do with Arizona. Any airline management with some common sense won’t touch it.

  5. @Caden Teo

    Ryanair is already super strong in the Italian domestic market. If anything, a renewed Alitalia focus on long-haul routes at the expense of domestic and intra european routes would be good for them.

  6. I can’t recall the specifics but I remember reading an article that said Alitalia was kicked out of the AF/KL/DL JV because of regulatory issues when they were trying to add VS and that the JV was planning on eventually adding Alitalia back in after legal teams figured out how to do so.

  7. @Caden Teo:

    You are of course right but the present times are not exactly good for complaining about state subsidies which will now be given to each and every world carrier, courtesy of China.

  8. the difference here is Air France and KLM are receiving a LOAN. Alitalia doesn’t appear to have to reimburse it

    Ryanair CEO is a hypocrite seen they get subsidies from regional airports

  9. LH has long coveted the Italian market. Their interest seemed more as a replacement for AZ, not as a partner. Maybe they will take AZ under their wings and be there ready to scoop up what remains there are when the ultimate end for AZ comes. And it will come.

  10. If they have the money to pump 3 billion into Alitalia then they should stop crying about how the ‘Northern EU countries’ would like to have some guarantees before transferring money to Italy, let alone Eurobonds. Hypocrites. Actually this time I hope Ryanair gets a victory in court

  11. Of course, O’Leary sees the opportunity of a life time when looking at the problems of the European national airlines. Perhaps, he should try to get some money from the Irish government. Irrespective of the validity of his arguments, I am sure no European government will let its airline go under, and I am also sure that they will oppose giving subsidies to the low-cost competition. In fact, they will love to see Ryanair disappear and so would I.

  12. Can alitalia not somehow join the AF/KL/DL/VS joint venture even though they weren’t originally included in it?

  13. Of the 6,622 employees furloughed, how many will get laid off after October? Once nationalized it’ll be a huge black hole for the Italian taxpayers. There is no way the employees are going to agree to any streamlining or efficiencies. I think Ben should transfer his “lucky” moniker to Alitalia as they’re more deserving of it…

  14. Lufthansa have made noises about Alitalia but they will not get involved if it is not on their own terms and the role of the Italian government is sidelined. The latter will never happen.

    Also remember Lufthansa Italia, a venture which almost ten years ago Lufthansa abandoned having had their fingers well and truly burned by the Italian market and employment protections.

  15. If they’ve got the backing of the government (and thus funding) would now not be the time to order a new efficient fleet (both long and short haul) on the cheap and overhaul their business model?

  16. I would appreciate if people did not use offensive terms (“hypocrites”) and tone towards my home country when discussing Alitalia’s issues.

    The problem with Eurobonds and similar negotiations that are taking place in Brussels are much broader then the specific Italian carrier issue (i.e. they involve much more than $3 billion). It is a similar discussion to the “why should California pay for Alabama?” kind.

    Also, in recent years the non-profitability of the airline had very little to do with overstaffing or labour protections (which are barely existent today in Italy). It suffices to look at the numbers and compare them with those of other airlines and you will discover that Alitalia crew are paid less than IAG or LH, and they tend to fly more (especially cabin crew). Finally, for those who do not know, Ryanair makes vast use of government money, directly or indirectly, by flying to certain small/unserved airports. Not to mention questionable hiring practices and fiscal strategies.

    While everyone certain has the right to their opinion, I would avoid generalizations and uninformed statements that rely on the usual rhetoric about Italy or the EU.

  17. C’mom… /facepalm. Italy refuses to take ESM, and demands corona bonds. They say anything other than corona bonds means no solidarity with Italy. Then Italian government will go ahead and nationalize Alitalia. Why should Germany and Netherlands citizen underwrite such thing from Italian government? I’m sure Italy would be ecstatic if German government nationalized the massive LH group and sent the bill to Italy as “corona bonds”…
    Stuff like this is what make northern Europe skeptic of euro bonds.

  18. LH enjoys great business when AZ is in trouble. I have many friends in the North (Milan, Firenze etc) that rely on LH via connections for most or all of their long distance flights.

  19. I’m thinking a new alliance is in the making: Alitalia, South African, Virgin Australia, and Air Mauritius. Their motto, “Together. Connecting the world in Bankruptcy.”

  20. I think this is more good money being thrown at bad. Alitalia is a joke, and the fact that they now intend it to be a new Alitalia, it won’t take long for it to be the old Alitalia, a mediocre airline that’s had too many wasted lifelines thrown at it.

  21. @ Andrea:

    [It is a similar discussion to the “why should California pay for Alabama?” kind.]

    Except that in Italy’s case, it has been going on since Vittorio Emanuele II.

    This coming from a Frenchman… I know, I know… “The French are sad Italians…” (rather true, by the way).

  22. If they’re looking for a transatlantic partnership, Southwest would be a good choice. They have the strongest domestic network outside of the Big 3, plus MCO and BWI as East Coast focus cities. Pre-SARS2, SW has said they aren’t looking to go transatlantic short term, but who knows what post-virus consolidation will look like.

  23. Ah, can’t edit comments. Southwest only flies 737s, so Alitalia’s wide-bodies would be making the trip over the Atlantic.

  24. @Donna
    “I am sure no European government will let its airline go under”

    So what’s the UK’s airline? Spanish-owned IAG? Delta+Branson-owned Virgin?

    The closest might have been Flybe, though that was allowed to go bust.

    I suppose easyJet might qualify…?

    I dunno: are we still living in a nationalistic/Imperial age, where every country *needs* a national anthem and a “flag-carrier”?

  25. Really looking forward to see what Alitalia does when it comes to alliance membership.

    No doubt the new Alitalia will be asking themselves what value they get out being a Skyteam member? Would the get more value from joining Oneworld? Oneworld could certainly do with having a few more European airlines join the alliance.

    Questions is – would Oneworld want Alitalia in the alliance?

    It’s likely that Alitalia would have to ‘get their house in order’ before being given approval to join.

  26. Someone needs to address the issue of level playing field quickly again. Whether its because of nationalizing airlines or dubious employment constructions.

  27. Alitalia was never truly respected as a Valuable Member in Skyteam and is a Good Reason to Exit the Alliance. ONEWORLD would be the Best Choice to allow Alitalia to be Alitalia and take care of the Italian/Southern Europe Markets. Lufthansa may be ‘interested’ in the Italian Market but by No Means will they allow Alitalia to flourish anymore than they have Brussels or Austrian in STAR….so No Way on STAR. Qatar Airways should have invested in Alitalia and not bothered with the Meridiana/airItaly fiasco but then again, Labor Unions at Alitalia are not the most cooperative Groups to deal with either. As an Italian, when Alitalia wants to Be Good they Can, unfortunately they have had too Many Chiefs and looking like circus clowns running the Operation. Italians want an Airline to Be Proud Of.

  28. Brilliant! This was the airline that in the middle of being bankrupt they were launching new uniforms that were actually far less elegant than the former ones… Alitalia’s CFO must be a monkey.

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