News Analysis: State's takeover of Italian airline Alitalia during coronavirus crisis could be temporary

Source: Xinhua| 2020-04-29 20:03:34|Editor: huaxia

ROME, April 29 (Xinhua) -- Casting it as the only way to save struggling airline Alitalia during the ongoing coronavirus pandemic, Minister of Economic Development Stefano Patuanelli has announced that the government would become the sole owner of the company starting in June.

But analysts said the takeover would likely be a temporary measure until the economy recovers and the company can renew its search for a buyer.

Alitalia was in trouble even before the outbreak reached Italy in January. According to analysts, the company was losing as much as 2 million euros (2.2 million U.S. dollars) per day during the low-season for tourism. It had also been looking for a buyer since 2017, when former partner, Abu Dhabi-based Etihad, said it was no longer interested in making the relationship work.

The company has been run under state administration since then as the company sought a buyer.

The pandemic delivered another blow to the Italian airline by grounding almost all flights around the world. Two consortia -- one led by U.S.-based Delta Airlines and the other headed by Lufthansa from Germany -- that had been mulling a takeover of Alitalia walked away from a potential deal.

According to information from the Ministry of Economic Development, Alitalia's revenue has declined by 88 percent so far this year compared to the same period in 2019.

In a statement, Patuanelli said the "new Alitalia" would operate a fleet of at least 90 aircraft, smaller than its current fleet of 113, and would focus on its strongest markets, which include the domestic market and selected long-haul routes.

Patuanelli's announcement was short on specifics, though he did say Alitalia would emerge from the crisis on equal footing with its larger European rivals. The plan includes a cash injection of 500 million euros (540 million U.S. dollars), bringing the total state investment in Alitalia to 2 billion euros (2.2 billion U.S. dollars) since the departure of Etihad.

"Up until now, Alitalia has been like a crystal vase among steel vases," the minister said. "When the sector restarts, the new company will start off in the same position as other airlines."

Alitalia's alliance for intercontinental flights with Delta expires at the end of May. Patuanelli said Alitalia could seek a different alliance, perhaps with Lufthansa, while under state ownership.

Alitalia has not conducted direct passenger service to China since 2018, but that could change under state ownership, analysts said. In a statement, the company has said cargo traffic between Italy and China has been one of its few remaining revenue streams during the pandemic, and state officials said they expect tourism from China to be a key growth area once the pandemic subsides.

Andrea Giuricin, a professor of public finance and mobility management at Milan Bicocca University, said he was unconvinced that the new company would be stronger under state control.

"One of Alitalia's central problems has been a lack of efficiency," Giuricin told Xinhua. "That isn't likely to get better under state ownership. Alitalia is too small to compete against the big European carriers on its own, and it is likely to keep burning through money until its basic efficiency problem is addressed."

Giuricin said the company's efficiency problems stem from too many employees, an outdated aircraft fleet, and a lack of focus on the most profitable routes.

According to Giovanni Dragoni, an airline sector analyst and the author of a book on the repeated rescue plans for Alitalia, the state takeover of the company will likely be a stopgap measure.

"In the long-term, Alitalia will have to survive as a private company," Dragoni said in an interview. "It clearly would not survive this crisis without the state stepping in. But I'd expect the company to look for a private buyer once things return to normal. Hopefully, state ownership will help improve the company's health in the meantime." Enditem