Alitalia – Fight or Flight?

Alitalia - Fight or Flight?

Alitalia – Italy’s long-troubled national carrier has been operating under bankruptcy protection since the start of May 2017, after the Gulf airline Etihad Airways refused to help bankroll the failing airline any further. This came just days after its employees rejected a radical rescue plan. The rescue plan would have seen the shareholders invest another €2bn to try and steer Alitalia back to clearer skies after struggling for more than a decade!

The Italian government stepped in to assist the ailing carrier by offering a short-term bridging loan of €600m. The loan would see the carrier continue operations to the end of October. It was hoped it would be enough time for new investors, or a buyer to be found. However on October 13th, just 3 days before a revised deadline for bids the Italian government has now given an extra €300m to help keep the airline afloat after no new bids were placed. This recent bailout by the Italian government is just one of the many they’ve had to provide over the decades and it now means that Italy has given Alitalia up to €900m this year alone! As the cash-strapped airline finds itself fighting for survival once again.

More than four months on since entering administration and the clock is ticking for Italy’s 70-year-old national airline. The Italian government has already ruled out re-nationalising Alitalia. Whilst also extending the bidding process twice due to a lack of interested parties. The deadline for potential buyers had been set for October 2nd but was pushed back to October 16th and now again to April 30th, 2018 to allow even more time for offers to be placed for the insolvent airline.

Ryanair, the Dublin based Low-Cost Airline had been putting together a bid to take over control of Alitalia. However, they announced at the end of September it was no longer interested. This came after the Italian government opened an investigation into the airlines handling of more than 700 cancelled flights, due to Ryanair’s recent internal struggle with its employees.

Since the start of October, rumors have been circulating that easyJet has been looking to make a bid for Alitalia. As well as Norwegian Airlines but no official announcements have yet been made. Despite this, life may never be the same again for the once great European airline. Its reputation has again being called in to question after filing for administration for the second time in less than 10 years.

11000 jobs are now again at stake and with no clear path emerging, no solid buyer yet in sight and the deadline fast approaching have they now run out of options? Well, It seems the next few months could be the most crucial for the Italian airline as it continues to teeter on the brink of collapse.

If no deal is reached by the end of April and if the Italian government are no longer willing to bail them out any further, Alitalia’s administrators will be forced to close the airline. If that happens they could be the third major European airline to go bust in less than 12 months.

Already October has been a difficult month for aviation after the long-established British holiday airline Monarch was forced to stop trading at the start of October after 49 years. It came after the majority shareholder, Greybull Capital refused to provide any more funding. In addition to the collapse of Monarch, it’s now emerged that Germany’s second largest carrier Air Berlin, which employs over 8000 people has announced that it too will stop flying at the end of October. Air Berlin has also struggled to make a profit for more than a decade and have been unable to find a buyer after months of operating in bankruptcy protection following a short-term loan from the German government.

If Alitalia was to fail as well it would be an unprecedented time for aviation with the effects not just felt in Europe but also around the world. The collapse of Monarch alone left 110,000-holidaymakers stranded abroad and the British government with a bill in excess of £60m to bring those stranded overseas home. The same possibility now looms for Germany and Italy if Alitalia isn’t saved.

For now, Alitalia’s life support remains in place and they continue to fight on… but for how much longer?