Among the legacy issues that Mario Draghi picked up six months ago in Rome, Alitalia is a particularly difficult piece. In order to keep the chronically bankrupt plane with the national colors green-white-red on the rudder in the air, short-lived Italian governments have thrown 13 billion euros out the window over the past 25 years. Now the agony must be over.
Like a phoenix from its ashes, a new airline will take off from Rome on October 15. It’s called Italia Trasporto Aereo, ITA for short, is relatively thin, but like its predecessor Alitalia, it is state-owned. The start-up must achieve what Alitalia, founded 75 years ago, has not been able to achieve since the liberalization of European air traffic in the 1990s: it must become competitive. The prospects for this are not rosy.
ITA, founded in 2020 by the government of five-star Prime Minister Giuseppe Conte, starts under the most unfavorable conditions possible. The coronavirus has plunged the aviation industry into the biggest crisis in its history. Even very healthy airlines have had to be saved from bankruptcy with billions in taxes. Faced with the big rivals, the Italian airline is now much smaller. In the battle for market share on lucrative long-haul routes, Alitalia’s successor will have a particularly difficult position. On domestic flights, they are pushing low-cost airlines more and more aggressively. In addition, the start date is unfortunate. The airline pickle season begins in October. The coming pandemic winter is likely to be particularly difficult. So the new flying adventure is not under a lucky star at the moment.
On the other hand, what is currently looming in Rome is a turning point. Every head of government before Draghi pumped tax money into the ailing airline without demanding structural changes from the company. The tolerance is now over. The 52 ITA planes will only take off in six weeks if the extraordinary inertia of Italian aviation is broken. The bitter truth: either the ITA takes off or there are no more national planes flying in the Italian sky.
Two investigations against Alitalia are still ongoing in Brussels
The history of this new start dates back to the height of state interventionism in the Italian economy. In the spring of 2020, the Conte government rejected foreign takeover bids on the insolvent Alitalia and instead founded the new airline ITA. Rome has provided 3 billion euros for the rescue of Alitalia. As usual, the pledge of money was accompanied by the claim that a holiday and export country like Italy must own an airline. This constraint had long since become a fragile pretext. In 2020, Alitalia only carried 7.7% of passengers to and from Italy.
At the time, two investigations against Alitalia were still ongoing in Brussels. It is verified whether the € 1.3 billion in loans granted in 2017 and 2019 were unauthorized state aid. Difficult negotiations begin. Competition Commissioner Margrethe Vestager demands that Italy break with the past. Your condition for the approval of the rescue operation is the restart with an airline that has nothing to do with the crisis pilot Alitalia. Draghi ends Italian delaying tactics in Rome. Alfredo Altavilla, internationally experienced top manager and long right-hand man of Fiat-Chrysler boss Sergio Marchionne, takes command of ITA. A new business plan will be presented which approximates Vestager’s terms. The breakthrough comes on July 15. The EU gives the green light to start the ITA.
The cuts are deep. The small airline will take off on October 15 with 52 planes, compared to 104 Alitalia planes. ITA will initially welcome 2,800 employees. Alitalia employs 10,524 people. The successor will receive 85% of Alitalia’s take-off and landing rights at Milan Linate City airport and 43% at Rome Fiumicino airport. The EU has also insisted on renouncing the Alitalia brand name.
The price of 100 million euros is rather symbolic
Now the countdown is on for the flight change. Shortly before the midnight deadline on Tuesday, Alitalia administrators accepted ITA’s offer to take over the flights division of the former airline. For the rather symbolic price of 100 million euros, the company procured the necessary rental planes, take-off rights and other activities directly related to air traffic.
But there is still a long way to go. The biggest obstacle on the way to Altavilla is the agreement on employment contracts for the 2,800 employees. The unions are reacting to the changes demanded the old way. They first called a strike on September 24. They demand that the ITA hire 5,500 employees and that the Corona partial unemployment benefit for Alitalia employees be extended until 2025. Altavilla has reportedly put on the table an innovative contract model, which the unions categorically reject. He wants to push through lower wages and more flexibility. Hurry up. The ITA must declare the composition of its crews to the air traffic control authority before 23 September.
That is why Altavilla reserves the right to enter into contracts directly with the personnel concerned in the event of failure of negotiations. There is no shortage of interested parties. Earlier this week, the ITA had already received 12,000 applications for 2,800 positions for pilots, flight attendants and ground staff. More surprisingly: so far, few Alitalia employees have tried to find a new job. 70 to 90 percent of applicants do not come from the crisis airline.