News Analysis: Future of Italy's troubled airline still in doubt, no new partner

Source: Xinhua| 2017-10-21 01:07:47|Editor: Hou Qiang
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by Eric J. Lyman

ROME, Oct. 20 (Xinhua) -- Nearly a year after officials overseeing Alitalia first announced the struggling airline would shop around for a buyer and with at least 900 million euros (1.1 billion U.S. dollars) in government loans on its books, Italy's national air carrier is right back where it started: desperately looking for a partner to help it stay alive.

The deadline for bids to take over Alitalia was delayed for the second time in a month on Oct. 16. Now, potential bidders will have until April 30, 2018 to submit bid proposals.

"I don't know what's going to change between now and next April," Andrea Giuricin, a management professor at the University of Milan Bicocca and a fellow at the Bruno Leoni think tank, told Xinhua. "By then, the company will have lost more money, the staff will be more dispirited, and the fleet will be that much older. If there are no acceptable bids now, why will they emerge in six months?"

Italian media reported that at least one bid was submitted for the Oct. 16 deadline: German carrier Lufthansa -- which in the past rescued Swiss Air, Australian Airlines, and Brussels Airlines -- reportedly offered to pay 500 million euros for most of Alitalia, including its fleet, routes, and name.

But the reported bid would have required the Italian government to write off the 600 million euros it had loaned a bankrupt Alitalia up to that point, and the Filt-CGIL trade union representing Alitalia workers would have had to give its OK to the layoff of around half of the company's 12,000 workers.

The proposal was rejected and the government announced the infusion of another 300 million euros in loans to help Alitalia survive until April.

"That offer as it appeared in the press, and I say it that way because we did not see an official offer from Lufthansa, was just unacceptable," Antonio Cortorillo, Filt-CGIL's general secretary, said in an interview. "We want Alitalia to be saved, but we are not willing to agree to reckless conditions."

Cortorillo said he continues to believe Alitalia will attract the right buyer and that it will reemerge from its current struggles and become a viable, healthy airline.

"We are hopeful about the next deadline," he said, though he declined to speculate about which company might step in to submit a better bid.

Alitalia's standing as a major air carrier has eroded precipitously in recent years. As recently as 2011, the company was Europe's most punctual airline, it turned a small profit, upgraded its fleet, and controlled more than half of Italy's domestic air travel based on seat volume.

Today, it is hemorrhaging money, has a dismal on-time record. Its customer service offices are mostly unmanned and its fleet is the oldest among western Europe's major carriers. Additionally, it only controls around 15 percent of the domestic air market, where it is a distant second to low-cost Irish carrier Ryanair.

The most recent blow to Alitalia came when Dubai-based Etihad Airways, which in 2014 took a controlling stake in Alitalia, announced it would abandon the Italian carrier after selling off some of its most valuable assets, including high-profile landing slots at London's Heathrow Airport.

At this point, most analysts say it is far from a sure bet Alitalia will survive long term. If the company collapses, Italy would become the first major European country without a national air carrier since Switzerland operated without one in 2001 and 2002, a period that ended when Lufthansa helped revive Swiss Air.

For his part, Giuricin, a frequent commemorator on Alitalia, said he continues to see Lufthansa as the most likely savior for Alitalia.

"I know reports say that a Lufthansa (proposal) was rejected and I don't know a way to persuade the company to upgrade its bid for the next deadline," Giuricin said. "But I think that the most likely way that Alitalia will still exist as a brand in a few years is for it to be part of Lufthansa's network, like Swiss Air and the others."