After months of talks with the European Commission (EC), the deal requires ITA to be completely independent of Alitalia and for the new company to surrender some of Alitalia’s flight slots in the main airports Rome Fiumicino and Milan Linate.
“ITA will be able to offer answers to air travel’s new requirements, [operating] with an intermodal and intertwined approach, taking into consideration sustainability, innovation and digitalisation, [working] in line with the EU principles,” commented TRANSPORT Minister Enrico Giovannini.
“The talks with the EC led to a constructive and balanced decision, which guarantees a much-needed discontinuity [from Alitalia], in accordance with the European norms,” read a statement from Italy’s Ministry of Economy and Finance.
“The positive ending of the talks between [the government] and the EC will allow the procedures to start regarding ITA’s increase in capital.
“It also creates the necessary conditions for the Memorandum of Understanding to transfer some of Alitalia’s activities to ITA.”
Praised at the EU and Italian Government level, the move was highly criticised by Italian aviation workers, with some trade unions saying that the transition from Alitalia to ITA would turn the carrier into a ‘bonsai company’.
Alitalia: a troubled history
Once an emblem of the economic boom of post-WW2 Italy, Alitalia has become a money-losing machine over the last couple of decades.
The company has been struggling with profitability issues for years, losing clients to low-cost carriers and high-speed railways. After a few attempts by the Italian Government to bail Alitalia out, in 2006 the EC forbade Italy from offering continuous financial support.
According to the EC, Italy couldn’t be offered any more rescue or restructuring aid as both can only be given once in ten years.
The EC opened a formal investigation in 2008 after the Italian authorities informed it that they had approved a €300m loan, causing a series of complaints from competing airlines.
This was not the only time Italy went against EU norms to bail Alitalia out. The EC has two ongoing investigations regarding Alitalia; the first one involved two loans worth a total of €900m in 2017 and the second loan was given in 2019 and was worth €400m.
“Should the Commission conclude that Alitalia received incompatible aid, any company which were found to be the economic successor of Alitalia would be liable to repay the incompatible aid,” read an EC statement.
Alitalia’s history is also full of changes in the company’s ownership, fluctuating between private and state ownership.
Initially a public company, Alitalia underwent several privatisation attempts during the 1990s and early 2000s. The Italian Government auctioned it three times until Compagnia Aerea Italia, a group made of different investors, purchased the company.
After almost going bankrupt, Alitalia was auctioned once more and, in 2015, Emirati carrier Etihad acquired a 49% stake.
Two years later, the Italian Government put the company under special administration for the second time in less than ten years.
From Alitalia to ITA: what the transition entails
The new company will initially start operations in October with only 52 planes, ending up with 105 by 2025, according to Reuters . By the same year, the company’s expected revenue is forecast to be around €3.3bn, growing steadily from an EBIT of €209m in the last quarter of 2023.
To achieve the revenue target it has set for itself, ITA will receive state funding for the next three years, initially starting with €700m in 2021 and then progressively diminishing to €250m in 2023.
According to Italian newspaper Il Corriere della Sera, the transition will not be as smooth as the company suggests it will be.
After seven months of talks between the EC and Italian authorities, one of the EC’s demands was for ITA to compete for the Alitalia in a public bid and for the company to give up some of Alitalia’s flight slots.
ITA also has to be completely discontinued from Alitalia to secure the EC funding approval.
“Following intense and constructive discussions at all levels, the Commission and the Italian authorities have reached a common understanding on the key parameters to ensure economic discontinuity between ITA and Alitalia,” read a European Commission press statement. “It is now for Italy to set out next steps.”
Repercussions for workers
This year, around 2,750 of the current 11,000 Alitalia employees will be transferred to work for the new company, with the numbers rising to a total of around 8,850 over the next few years.
Despite reassurances from the Ministry of Economic Development that Alitalia will be in charge of the social repercussion of the transition, the fate of more than 2,000 workers is still unknown.
Aviation and workers unions have always opposed the transition plans, calling the proposals “incoherent and inadequate compared with Italy’s as well as workers’ necessities.”
Italian unions CGIL and FILT said that they were vehemently opposing a project that would downsize the fleet, as what is needed is “an industrial project with a fleet that can compete with the main European carriers.”
“The new Alitalia,” commented the unions in April 2020, “must invest on flying, maintenance and handling, not excluding any workers.”
More than a year and a half later and despite the many strikes that took place, many Alitalia employees still don’t know if they’ll be part of the new company and when, according to a source who wishes to remain anonymous.
“I don’t think anyone can answer [about the fate of Alitalia’s workers],” they tell Airport Industry Review. “No one has any idea of what’s going on, as we don’t have any internal information and we only know what the newspapers tell us, just like anyone else.”
The problem with starting with a small number of employees is that, once ITA needs more people, it will not find them.
“If you make people redundant now, it’s not obvious that you will find them once the company is doing well and you need them,” the source continues. “It takes years to train a pilot because they need to train and study and cannot be deployed at a moment’s notice.”
Another issue Alitalia workers face is the uncertainty of what type of aircraft ITA will deploy.
“We read a lot about what type of aircraft ITA will use but what people outside of the business don’t know is that every type of plane has its own characteristics and pilots need to be retrained if they are not used to a certain type of aircraft,” comments the source.
Apart from the technical impediments that have not been divulged to the staff, the uncertainty of the transition from Alitalia to ITA is making life difficult not only for the current staff but also for all the related businesses that deal with the company daily, such as shop and restaurant owners.
“I don’t know how ITA will employ that many people, I’m genuinely curious to find out how they’ll do it starting with only 52 planes.”
The popular opinion, the source says, is that starting with such a small number of aircraft will undermine ITA’s competitiveness, leading to the company being absorbed by other carriers.
“Other companies have more than 200 planes; if we start with 52 planes it’s possible that we’ll get absorbed by a giant such as Air France or Lufthansa.”