Alitalia rescue hopes rise as Lufthansa looks set to step in

An Alitalia airplane is seen before takeoff at Leonardo da Vinci-Fiumicino Airport in Rome last year. | REUTERS

Reuters

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Oct 18, 2019

BERLIN/ROME – Alitalia received a boost to its hopes of rescue on Thursday with signs that Lufthansa could take a stake in the Italian carrier, while Rome agreed to a €350 million ($389 million) bridging loan to ease immediate cash worries.

Loss-making Alitalia has been run by special administrators since May 2017, and talks led by state-owned railway group Ferrovie dello Stato to put together a consortium of rescuers have been going on for a year without coming close to a deal.

Until now Ferrovie has been negotiating with U.S. carrier Delta Air Lines and infrastructure group Atlantia, but the three potential partners have been divided on key aspects of the rescue plan, including the size of their respective investments.

On Thursday, two people with knowledge of the matter said Germany’s Lufthansa was now offering not only a commercial partnership, but could also take a stake in the rival.

Lufthansa would be open to making the investment if conditions, mainly regarding restructuring measures it deems necessary at the Italian firm, were met, one of the sources said. Lufthansa declined to comment.

With Alitalia burning through its cash reserves, and down to just €310 million by the end of September, the carrier urgently needs new investors and a fresh business plan that will enable it to prepare for next year’s peak summer season.

To give the firm more time to negotiate a rescue deal, Rome could grant a postponement of up to six weeks to an Oct. 15 deadline for Ferrovie to present a binding bid for the carrier, two sources said.

Rome will also give the carrier a new bridge loan of €350 million, a draft decree seen by Reuters showed.

Lufthansa has said many times in recent years that the Italian market was an interesting one for the company, but so far it had demanded shrinking Alitalia in terms of staff and fleet, making that an unpalatable option for Rome.

The German carrier still insists on restructuring, but is now willing to talk and might be more flexible, one of the sources said Thursday.

A government source said Rome would welcome the German carrier taking a stake in Alitalia.

The Italian airline, which went through two previous rescues in 2008 and 2014, has a workforce of 11,600 people.

The involvement of Lufthansa would likely close the door to Delta, which has expressed commitment to contributing only around €100 million to the rescue of Alitalia, angering Rome.

Alitalia is currently part of the Skyteam alliance with Delta, Air France-KLM and other carriers, while Lufthansa is a member of rival Star Alliance.

According to a source close to the matter, an exit of Alitalia from Skyteam to join Star Alliance would involve costs of around €80 million, not hundreds of millions of euros as some Italian media have reported.

Italy’s Il Messaggero newspaper earlier reported that a senior Lufthansa executive said the company was ready to acquire a stake in the Italian airline.