Troubled flag carrier Alitalia will become once again a state-owned airline

Troubled flag carrier Alitalia will become once again a state-owned airline as a result of a new decree signed on Mar. 16 by Italian Prime Minister Giuseppe Conte as part of a relief package to support the economy in a country hit hard by the COVID-19 pandemic.

Alitalia was supposed to be split into three units: aviation, maintenance, and handling and sold off to the highest bidder in a process that was due to be completed by the end of May 2020. The deadline to present binding offers for one of all of the units were scheduled to be Wednesday, March 18, but even before the deep crisis caused in the aviation industry by the recent pandemic sprawling across the world, interest for the chronically loss-making carrier has been very soft.

The Italian government has therefore decided to create a new state-owned company that would make a bid for all three units of Alitalia and to invest 600 million Euros into the venture. The company had already received a bridge loan of 400 million Euros last November that was supposed to see the carrier through its sale at the end of May, but the new market conditions have almost exhausted the loan, therefore needing an extra cash injection to maintain operational continuity.

In May 2017 the carrier had already received another bridge loan for 900 million Euros to guarantee its survival and find parties interested to take over all its assets and operations, but during that time no satisfying solution could be found and the funds eventually ran out, requiring a new cash injection.

The European Union in Brussels has been investigating both interventions by the Italian Government under suspicion of being illegal state aids, but no formal infraction has been contested so far.

“This experience (of the coronavirus) teaches us that a national carrier is strategic for the destiny of our country from many different standpoints,” Transport Minister Paolo Di Micheli told Italian TV Rainews24, ANSA reported. “This experience will confirm to us that we need our flag carrier.”

The Government will also guarantee enough funds to provide temporary financial relief to the 3,960 employees, all of them from the aviation unit, furloughed by commissioner Giuseppe Leogrande at the end of February as a temporary measure for the COVID-19 crisis.

It is expected that many carriers in Europe and around the world will need government support to get through the current crisis, therefore the Italian government does not expect to have problems with the Brussels Authorities for this operation.

The new state-owned company will, therefore, see all 11,000 employees remain under the same umbrella and continue to operate with the already planned fleet reductions that will see aircraft numbers decrease throughout 2020 to approximately 100 aircraft from 113 jets that were operating at the end of 2019.