The Alitalia airline was hailed by many as Italy’s answer to Air France – but six years after it was acquired by a consortium of airlines and banks, the carrier is up for sale.
To understand the company’s demise, it is useful to trace its recent history. It was formed in 1994 from seven competing airlines to compete with the established players of Lufthansa and Air France and is the country’s most venerable carrier.
Alitalia began on track but was derailed when deregulation under the previous government broke the dominance of two airlines on domestic flights. The plan was to consolidate the fragmented air transport sector but the formula did not go to plan. During the 1990s the commercial environment got tougher.
Italian high-speed trains at their most on point Read more
In 2001, as the private sector was becoming more willing to move out of the industry and the Italian government was getting ready to sell Air France and other airlines to Air Berlin and Lufthansa, the founding shareholder Valor launched a takeover bid for its closest rival, the Air Italy and Alitalia Group. However, the consortium lost its initial bid to buy the whole airline group as it did not have the full backing of Air France, which was attempting to acquire the loss-making Air Algérie holding company (Algérie-Lufthansa). In November of the same year Valor snapped up Italy’s fourth-largest airline, Premium, via a “stabilisation” deal. Then Valor and its partners bought Air France’s 27% stake in Alitalia and decided to push on as a joint company.
The economic downturn that struck Europe in 2008, which was exacerbated by the worldwide recession, took a heavy toll on Alitalia, which made a loss of €102m (£86m) in 2008. A new chief executive was appointed. Giovanni Bisignani was the former head of the European Union’s market regulator, BEA. In August 2008, Alitalia wrote off €1.9bn in the value of its fleet and announced 18,000 job cuts to be made over the following two years, including about 15,000 staff.
Italy’s response to the crisis was to turn to private investors and, in early 2009, Alitalia started trying to convince them to invest. But the US buyer Delta Air Lines pulled out of a deal to buy a 45% stake in the company and the new sharemarket fell in that same year.
The government stepped in and injected €150m in early 2009. Alitalia struggled on without a partner and approached Air France in March 2010 about another takeover deal. But talks broke down over price disagreements and talks with Emirates collapsed in April 2010. Alitalia presented more than a dozen different offers from airlines, including Delta Air Lines and Etihad Airways.
In 2011, Alitalia announced the sale of its passenger routes for €2.4bn to Emirates and that it had struck an alliance with Jet Airways of India.
The deal would have been the largest privatisation in Italian history, but Alitalia decided to terminate negotiations with Jet Airways last August, though the partner could yet buy out Alitalia’s Indian operations.
The deal, which could result in an equity injection of €100m in July, was still being negotiated in the autumn when the then prime minister Silvio Berlusconi stepped down. The subsequent collapse of the economy led to fresh austerity measures and 15,000 job cuts, which added further fuel to rumours about a falling out between staff and management.
The government resumed efforts to sell Alitalia after Mario Monti, then prime minister, named the government minister Luca Zaia, a Ferrari enthusiast, as minister of economic development and transport. Zaia found no takers and the fate of the airline was left to a current strategy officer, Salvatore Rossi, to work out a sale.
This article was amended on 11 March 2020