From Alitalia to Ita: decline and rebirth of the Italian airline

On October 15, 2021, the first Ita (Italy air transport) flights will depart, the new national airline that will replace Alitalia, under extraordinary administration from May 2, 2017. The company is wholly owned by the Ministry of Economy and Finance and starts with a € 1.35 billion public capital increase authorized by the European Commission. Ita will have an initial fleet of 52 aircraft (to then rise to 78 in 2022) and will serve 45 destinations with 61 routes and will employ about one third of the employees. According to the trade unions, there are 7,700 jobs at risk and an agreement on the contract and management of redundancies has not yet been reached with the new company and the Ministry of Labor.

The trade unions ask for a period of extraordinary layoffs for four years but the government at the moment does not seem willing to grant it. For its part, Ita is asking for a reduction in salaries of up to 40 percent. On the afternoon of Monday, September 20, there was a meeting between the company and the unions but the two parties did not find an agreement on the new employment contract. At this point the company will hire employees by applying its own regulation, outside the perimeter of the national collective agreement. On the same day there was a meeting at the Ministry of Labor on the renewal of the layoffs for redundancies. The unions asked that the measure be extended for the entire duration of the new company’s industrial plan, that is, until the end of 2025, but at the moment the extension of the allowance remains at one year. Meanwhile, an air transport strike was called for Friday 24 September.

The Alitalia airline was founded in 1946. In the eighties it was the third European airline but the liberalization of European transport in the following decade brought the first problems. The privatization of 1996 was followed by 25 years of crisis marked by trade union protests and various unsuccessful sales attempts. In 2008, to preserve the Italian character of the group, a consortium of Italian entrepreneurs came forward who would be defined as “brave captains”: they bought Alitalia and attempted a reorganization operation through the Fenice plan. The plan proved to be unsuccessful and in 2014 Ethiad arrived as an industrial partner. The Arab group takes over 49 percent of the company and remains a shareholder until 2017, the year in which it declares that it no longer wants to invest. The shareholders’ meeting and the board of directors initiate the request for extraordinary administration of the company but to continue flying its planes, Alitalia needs liquidity. The government of the time led by Paolo Gentiloni issues two loans for a total of 900 million euros and places the airline in a special bankruptcy procedure. The process is preceded by a referendum in which the staff of the company took part, who rejected a pre-agreement between trade unions and the company with 67 per cent of the no. The pre-agreement provided for a recapitalization of two billion but included about a thousand redundancies.

The official birth of Alitalia’s heir airline was sanctioned on 10 September 2021 with the green light from Brussels, after months of negotiations with the Italian government. The European Commission has sent Italy a comfort letter (the document through which the commission says whether an agreement between companies complies with competition law or not) with which it gave the go-ahead for the operation. In parallel, however, it established that the 900 million euro loan made by the Italian state to Alitalia in 2017 was illegal and must be repaid. However, the repayment of the loan will not be up to Ita, which in fact, while taking over some assets from the former company, will operate in economic discontinuity with the past. Brussels will shortly decide on further aid of 400 million euros obtained by Alitalia in 2019. The former flag carrier is in receivership – a procedure provided for by bankruptcy law for large companies that aims to preserve its assets and production – from 2017. The company’s activity will cease on October 14th. The sums due to creditors will be at least partially covered by the liquidation and sale of certain assets. As for the fate of the brand, the commissioners have started the tender for the sale and it will start from a base price of 290 million euros. The call is open to carriers of all nationalities. Ita has declared that it is interested in participating in the tender for the acquisition of the Alitalia brand but there is also attention on Ryanair’s moves. Offers can be submitted until October 4th. Raises will be possible and the bid with the highest price will win.

In 2020 Alitalia had 6.3 million passengers (-70 percent compared to 2019) and closed the year with 590 million euros in revenues (-78 percent). To date, there is no exact estimate of how much the company’s financial problems have cost Italian taxpayers. According to a Mediobanca R&D study, from 1989 to 2007 the national airline closed at a loss for 15 years, accumulating 4.4 billion in losses which become six billion at current values. According to Affari & Finanza, from 1974 to 2017 Alitalia’s losses totaled 9.6 billion euros (updated to 2017) for an investment in the company by the state of 10.6 billion.

Those who have booked flights with Alitalia departing after 14 October will not be able to use the same tickets for the new company. However, travel tickets will not be lost. The company has provided for the full refund of the ticket or replacement with another flight managed by Alitalia itself by 14 October. To protect consumers, the government has made available a fund of 100 million euros.

Edited by Greta Ubbiali