As I previously explained in my Delta Joint Venture article with Air France-KLM and Virgin Atlantic, Alitalia isn’t part of the JV alliance. The transatlantic routes are not one of the air routes where Alitalia makes money. Thus, the question is, should Alitalia part with SkyTeam?
Alitalia’s restructuring has not been pretty up to this point.
New Suitor in Lufthansa
Now it seems to be a new suitor which wants to help Alitalia, found in fellow airline Lufthansa. However, before investing it comes with a set of preconditions.
Are Alitalia’s days with SkyTeam numbered and is it time to part ways?
Could it be the last chance for Alitalia?
At the end of November (November 19), there was a letter from Lufthansa to the Italian government with preconditions that needed to be met before the airline can invest in Alitalia.
Some of these preconditions were disclosed in a leak, giving the airline (Alitalia) the roadmap to decide the future of the company.
Some of the preconditions are:
- Alitalia must shrink its fleet by 30%.
- Alitalia needs to restructure its maintenance division and sell its baggage handling unit.
- In turn, Lufthansa is willing to invest up to $177 million (€160 million).
- If Alitalia leaves SkyTeam (where Delta, Air France-KLM belong) and joins Star Alliance (where United and Lufthansa belong) Lufthansa would invest an additional $55.6 million (€50 million)!
Italy is trying to maximize its investment
A day after the Lufthansa letter, Delta Airlines reiterated the pledge to invest around $110 million (€100 million) for a 10% stake of Alitalia.
The Italian government with Prime Minister Giuseppe Conte earlier in the summer tried to persuade Delta, with no success:
The government concluded that “a 10% stake” seems to be a bit low for business involvement.
However, Delta did not buy the Italian Story
Delta, while it’s keeping their cards close to the vest, it didn’t fall for the cajoling of the Italian government. Ed Bastian (Delta CEO) was quoted saying, “we are interested in acquiring precisely 10% of Alitalia.”
For Alitalia, its a matter of survival.
For Alitalia, it is a bit complicated as it could mean re-nationalizing the airline once again. “This is the last chance, after this, there’s no turning back.”
Alitalia can stick with Delta and SkyTeam. That would mean the end of the story.
Or, Alitalia can plot a course with Lufthansa. They can leave the SkyTeam Alliance and join the Star Alliance with Lufthansa if Lufthansa can show Alitalia how beneficial the partnership is
Food for Thought
Delta cannot offer a transatlantic joint venture with Alitalia because it will raise concerns in the EU and the U.S. Department of Transportation.
Time to leave SkyTeam
I think it is Alitalia’s turn, to exit, and stage left. I believe that from SkyTeam’s perspective it won’t be missed.
Thoughts about the restructuring of Alitalia
Lufthansa is certainly investing more into Alitalia, by all accounts, even if it doesn’t leave the SkyTeam alliance.
Also, the Italian government says that there is space for multiple partners in the airline space. In reality, there is only space for one:
Delta or Lufthansa.
There cannot be space for both to co-exist in this investment.
What would Alex do?
If I were in Alitalia’s top management team’s shoes, I would start by taking Lufthansa’s offer and sell the baggage handling unit. I would also reduce my workforce and leave the alliance (SkyTeam) for Star Alliance to maximize the investment.
Why stick with Lufthansa and the Star Alliance?
Now, if you ask, why do I make a point out of these possibilities? Simple, the airline is out of the transatlantic joint venture with Air France, Virgin Atlantic, and Delta.
Leaning towards Lufthansa means Alitalia must be getting something extra beyond the transatlantic or joint venture partnership with Lufthansa. That, in turn, could even result in an entire buyout of Alitalia down the road.
Should Alitalia part with SkyTeam? Do you agree with the reporter’s analysis of the situation? Please let your opinion be known. You can contact the reporter, Alex Martinez Rivera, here.
Featured Image: Alitalia.