Alitalia sale delayed after string of woes at European airlines

Italy’s economic development ministry blamed the delay on “extraordinary events” changing the “strategic dynamics” in the sector

The sale of Alitalia, Italy's flag carrier, has been delayed until next April, adding to uncertainty in the European airline industry following a string of woes at Ryanair, Air Berlin and Monarch Airlines.

Pushing back the sale to April may prevent it from flaring up as an issue in Italy’s general election, which is likely to take place in March, according to Italian political analysts.

In a statement, Italy’s economic development ministry blamed the delay on “extraordinary events” changing the “strategic dynamics” in the sector, including the break-up of Air Berlin, the failure of Monarch and the “operational crisis” at Ryanair.

Alitalia, which is run by three government-appointed commissioners after collapsing into bankruptcy in May, was due to receive non-binding bids for the company on Monday evening.


But while the original plan was for a decision to be made on the new owner in November, the deadline was moved following a cabinet meeting last Friday.

The extra time means an extra €300m of taxpayer funds will be ploughed into the beleaguered airline, on top of €600m designated earlier this year to keep Alitalia afloat during the transition to a new owner.

Ryanair had been a potential buyer of Alitalia's aviation unit, but dropped out of the bidding last month. Other airlines, including Lufthansa and easyJet, are still expected to submit offers, but more time was needed to negotiate the terms of any purchase, one person close to the talks said.

On top of adding more funds to the bridge loan, the government extended its lifespan until September of 2018, to cover the extra time required for the sale and any approval by antitrust authorities.

A change of hands at Alitalia in the middle of a general election campaign risked being a liability for the ruling centre-left Democratic party (PD), which is already facing a tough battle to stay in control from both the centre-right opposition and the anti-establishment Five Star Movement.

Matteo Renzi, the former prime minister and leader of the PD, had vowed last May to come up with his plan for the airline, but has since backed away, leaving the government to handle it.

The government is already facing a backlash over the sale of Ilva, the steel group also in administration, to a consortium led by ArcelorMittal, which involves the lay-off of more than a quarter of the workforce.

The delay in Alitalia’s sale marks the latest chapter in the long-running saga surrounding the airline, which was rescued with high hopes in 2014 thanks to an investment by Etihad, the UAE-based carrier.

However, a combination of high overhead costs, tough competition on short-haul routes and lack of growth in more profitable long-haul routes, jeopardised Alitalia’s recovery leading to its bailout this year.

- Copyright The Financial Times Limited 2017