Why Ryanair’s interest in bankrupt Alitalia is puzzling

Italian airline hasn’t made a profit since 2008 and is losing €100m a month

Ryanair's insistence that Alitalia would need an overhaul if the Irish airline were to buy it makes sense. The only difficulty is that the Italian flag carrier is in its current state because nobody seemed willing to overhaul it in the first place.

Alitalia is in the hands of administrators who must decide whether it should be sold, wound up or restructured. It owes creditors around €3 billion and is losing €100 million a month.

Ryanair, on target to make a profit of around €120 million per month, is one of 10 interested parties that have made non-binding offers to buy or invest in Alitalia. The only other known one at the moment is Abu Dhabi-based Etihad, which already owns 49 per cent of the Italian operator.

The administrators took over Alitalia after it became bankrupt in May. Two thirds of its workers had rejected job cuts and an 8 per cent wage reduction, negotiated by their trade unions as part of a deal to save the carrier. Previous to that, they threw out proposals that involved cutting 2,000 of its 12,000 jobs and reducing pay by 30 per cent.


Once the administrators took over, the centre-left government gave Alitalia a €600 million bridging loan, enough to cover six months’ losses. Strictly speaking, the Italian state no longer owns the airline, which was privatised in 2008. So the government cannot prop up Alitalia indefinitely as this would break EU state aid rules.

Life support

Nevertheless, on the basis that it is keeping Alitalia on life support, plenty of commentators believe that prime minister Paolo Gentiloni and his colleagues may want some say in its future.

The prospect of an election by the end of the year – and definitely by next May – complicates this even further. Presumably, one of the reasons the government loaned Alitalia money was that it feared there would be consequences at the ballot box should the company collapse.

None of this tackled the underlying problems that left Alitalia bankrupt. It has failed to make a profit since 2008. In 2014, Etihad bailed it out but could not turn the company around.

On that basis, it is hard to know what Ryanair sees in its Italian rival. The Irish company said just weeks ago that it would take over Alitalia’s short-haul business and sell the Italian operator’s long-distance flights on its website.

Ryanair did not give any details of its bid yesterday, so it is not possible to say if that is what it is proposing, but this is the approach that most analysts think makes sense.

It is already the biggest player in Italy’s short-haul market, flying 36 million passengers a-year. It sells Air Europa’s transatlantic flights on its website, so there should be no difficulty doing this for Alitalia.

However, it is clear from Ryanair chief executive, Michael O’Leary’s remarks on Monday that his company only believes an Alitalia deal makes sense if the costs are right and there is no government interference. There is no guarantee that both those conditions would be met.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas