Alitalia has yet to take off after billions in aid.

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It has been in crisis for almost thirty years and in bankruptcy proceedings since 2017, but Alitalia, the Italian flag carrier, has yet to take off. The coronavirus has only increased the financial problems that it has been dragging on and has led the government of this country, within the decrees that it established to help companies during the pandemic, to take the decision to renationalise it by providing aid worth 3 billion euros after several failed attempts to privatise it.

It is estimated that in the last twelve years, the various Italian governments, of different colors and parties, have allocated around 13 billion euros to save Alitalia. After eight attempts at sale that did not succeed, and after going through five different directions, Giuseppe Conte’s government opted to inject money again, and this time to convert Alitalia back into a state airline, in spite of criticism from many experts who consider the airline to be a bottomless pit of public money. In 2019 alone it had almost 600 million losses.

Several months after it became clear that Alitalia would be renationalised, there are still many doubts about what the government wants for the airline. The Corriere della Sera published this week that the draft decree of the constitution of the new company is on the table of the Ministers of Economy, Transport, Economic Development and Labor, aware that it should be approved already this September. When the last few knots are resolved, the designated managing director, Fabio Maria Lazzerini, will have to hire a new management to get to work.

As far as we know at the moment, the new Alitalia will have an even smaller fleet of aircraft than the current one (last year it had over 110) and “will focus above all on long-distance routes, also with new transatlantic alliances,” said the Minister of Economic Development, Stefano Patuanelli.

According to Ugo Arrigo, a professor at Milan’s Bicocca University, everything depends in large part on Brussels’ willingness to allow or not this injection of government money into an airline that was already in trouble long before the virus appeared. Arrigo assures that 3 billion are indeed reserved, but for the moment the new company only has a financial endowment of 20 million awaiting the approval of the EU, which has already had its eyes on the Italian airline for some time.

Since 2017, when it entered into bankruptcy proceedings, Alitalia has already received two state loans of 900 million and 400 million euros to guarantee its operations. The European Commission (EC) is investigating whether both loans constituted state aid and complied with the rules on state support for companies in difficulty. Not only that, but Ryanair announced in July that it would appeal to the EC over the nationalization of Alitalia, which CEO Eddie Wilson called a “black hole.

Meanwhile, the debate continues in Italy between those who consider it fundamental to maintain a large Italian company and preserve jobs and those who defend that continuing with the aid only increases the problem. Arrigo is one of those who believe that saving Alitalia is cheaper than closing it and laying off its more than 10,000 workers, but he thinks that the reduction in the fleet is a problem for its viability: he sees it as inconceivable that a large European country should have a small flag carrier, because as the size of the company is reduced, space is also left for competitors. On the other hand, the also economist Andrea Giuricin, professor of Transport Economics, bets on the closure of the company if Italy is not able to sell it to a private operator, because he considers that with only a 13% market share it will not be profitable. “We must say enough to public money. If someone wants to buy it, great, but the more time passes the more complicated it is,” warns Giuricin.

The mistakes that have been made are many, from betting on short range flights a little more than ten years ago, when low-cost came in strongly and high speed was created, to the lack of a strategic plan for years to refloat the company. It remains to be seen if with the latest injection the new state airline will be able to fly itself once and for all.

By Anna Buj – La Vanguardia

Photo: Anna Zvereva / Wikimedia