Three interested in Alitalia

photo by WTL photos

Italian Prime Minister Romano Prodi recently said that Air France/KLM, Lufthansa, and Italian domestic carrier Air One were interested in making a bid for struggling Alitalia. (Previously interested Aeroflot has already quit the bidding.) All bidders have until December 6 to make a non-binding offer. In an interview with the German newspaper Frankfurter Allgemeine Sonntagszeitung, Lufthansa CEO Wolfgang Mayrhruber said that "Alitalia has big and barely manageable problems. We are studying whether we can find a recipe (to fix these) and make a bid."

It should be pointed out that Alitalia is losing about 1 million euros a day and is affected by frequent strikes (both inside and outside of the company). If one of those airlines is going to make a bid for Alitalia, they'll have to deal with "big and barely manageable problems" indeed.

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United international route rumors

photo: "N646UA", by Drewski2112

There have been a few rumors floating around that United Airlines might start some new international routes. Among them:

• Chicago - Moscow. Aeroflot used to fly this route but stopped in 2001, and United holds the dormant route authority for the route, which it obtained in a deal with Pan Am back in 1991. (If United did fly this route, it would probably skip Moscow's Sheremetyevo Airport (SVO) and instead fly to Domodedovo Airport (DME) because its fellow Star Alliance carriers fly there.) But the US-Russia market is currently served by a lot of routes - Delta flies Moscow - Atlanta and Moscow - New York (JFK), and Aeroflot flies Moscow - New York (JFK), Los Angeles, and Washington (IAD).
  
• Chicago - Milan. If United did fly this route, it would compete with Alitalia.
• Chicago - Düsseldorf. United used to fly this route but stopped in 2001. Star Alliance partner Lufthansa flies it with an Airbus A319, but is supposed to upgrade the route to an Airbus A330 in May.

It has also been rumored that United would upgrade some of its Boeing 767-300s, including a switch from a two-class domestic configuration to a three-class international one, and an engine upgrade. These upgraded 767s would be used on the route.

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No buyer, no Alitalia?

What happens next for Alitalia?

The Italian carrier has seen its suitors drop out one by one: Aeroflot said no, Lufthansa-backed Italian carrier Air One said no, and MatlinPatterson, a US firm, was the last bidder - and it too said no. That leaves, well, nobody to bid for Alitalia, and it leaves the Italian government in a bit of a bind: it is under some pressure to solve the problem - especially when the 'problem' is losing 2 million euros ($2.8 million) a day. "When something is diseased, you need to amputate it," said Infrastructure Minister Antonio Di Pietro. But on the other hand, the Italian government has come under fire from the unions and opposition groups for the collapse of the seven month-long sale, and the current quagmire is not making it look any better.

Why aren't there any interested bidders? A major reason: the terms and conditions imposed upon the potential buyers by the Italian government. A buyer wouldn't be allowed to cut as many of the 20,000 employees as it wants to, for example. The dual hub system, at Milan and Rome, is inefficient, especially when Alitalia's competitors only have one (e.g. Lufthansa, British Airways, Air France, etc.) And labor unrest is a major discouraging factor - in fact, 100 Alitalia flights were canceled yesterday as some of its staff went on strike. Who knows, though - maybe the government's threat of liquidation might scare the unions into not striking. And there still might be bid in the future - the Italian government has said that it might directly contact some of the former bidders to strike a deal, since it is (understandably) seeking to get out of this mess (and to sell 39.99% of the airline, even though it could sell up to 49.9%). And Alitalia, Air One and MatlinPatterson have said they might be interested in buying - if the government relaxes some of its regulations. The newspaper Il Corriere has said that the Air France-KLM group might be interested, even though a spokesperson for the group said that the Air France-KLM would not be interested in Alitalia unless it is restructured.

In any event, it's up to the Italian government now to make the next move. I'd be interested to hear the opinions of The Airline Blog readers - do you think Alitalia, the historical flag-carrier of Italy, should be saved? Or is enough, enough - should it just liquidate (and maybe start over)?

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Ryanair to sue EU as EC investigates Ryanair

European discount carrier Ryanair has said that it will sue the European Commission, the antitrust regulatory body of the EU, because it failed to look into complaints about state aid given to Air France and Lufthansa.

Ryanair alleges that Air France received discounted airport fees from the French government and that Munich airport in Germany is building a new terminal for Lufthansa, even while the airport loses money. Ryanair also accuses the EC of approving "mulitbillion bailout packages" for Alitalia, while Olympic Airways has benefited from "massive injections of state aid" from the Greek government.

At the same time, the European Commission has launched an investigation into government aid grants by Finland and Germany for regional airports - the kind that Ryanair typically uses. The EC ruled a few years ago that the airline received illegal aid at Charleroi Airport, in Belgium, and Ryanair had to pay part of it back.

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Aeroflot says 'nyet' to Alitalia

photo courtesy albspotter

Russian carrier Aeroflot has withdrawn from the bidding process for Italian airline Alitalia, ending months of speculation of a possible takeover. In a press release, Aeroflot said, "Aeroflot believes that acquiring Alitalia under the current conditions would not be the right decision for it to take."

According to the airline, two reasons that led to the decision were the fact that Aeroflot did not get access to "critical information" regarding the "commercial and operational aspects of Alitalia’s business to confidently formulate a well supported business proposal to successfully restructure Alitalia". Another reason: "The conditions and requirements outlined for the privatization process would significantly limit the ability of Aeroflot to implement what Aeroflot believes to be the necessary measures to re-launch Alitalia."

This leaves Lufthansa-backed Italian carrier Air One as the only airline left in the bidding as of now.

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Possible takeover of Alitalia by Air France?

Air France/KLM, the airline group that's the largest in Europe, said yesterday that it was in talks with Alitalia about a possible takeover of the Italian flag-carrier. Alitalia is half-owned by the Italian government, and hasn't made a profit since 1998, but has instead remained flying over the past few years due to government bailouts.

A potential problem that stands in the way of the airline's profitability is the fact that it has two main hubs: one in Milan and one in Rome. Most European airlines, by comparison, really have one main hub: British Airways in London, Lufthansa in Frankfurt, Air France in Paris, Iberia in Madrid, etc. Alitalia also has to deal with a bunch of new start-up airlines as well.

The chances of such a takeover aren't very good. The Italian unions have voiced their displeasure, as has the Italian prime minister, Romano Prodi. "I would like to know Air France’s real intentions. Does it want to create a big European transport group in which Italy would also have a place, or simply grab the Italian air transport market, which is large and very lucrative?” he said in the French newspaper Le Figaro.

Air France and Alitalia are already members of the SkyTeam Alliance.

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