On 15 July, Italy reached a long-awaited deal with the European Commission following months of talks on the future of its national airline to ensure discontinuity between the old and the new company
ITA is ready to take off. After months of talks between the Italian Government and the European Commission, the new State-owned company has unveiled its industrial strategy on 15 July and will be operational as of 15 October.
During the negotiations between Rome and Brussels on the future of the loss-making air carrier Alitalia, the Commission wanted to ensure as much discontinuity as possible between the two companies. This will make sure that ITA will not be held liable for paying back more than 1.3 billion euros that Alitalia has received in state aid in 2017 and 2019. The EU’s executive branch’s investigation to assess the compliance with the bloc’s rules is still pending. Brussels will likely conclude that those subsidies were illegal and need to be recovered. In light of the common understanding of what the economic continuity between the two air carriers means, it would be up to the old Alitalia – that will leave the market altogether in less than 2 months – to repay any improper state aid.
As a result, the Italian Government’s initial plans to transfer much of Alitalia’s assets to ITA without a public tender has not been successful, with the Commission worried about making the new company as independent as possible from its predecessor. This is meant also to avoid possible cases should competitors such as low-cost carriers choose to sue the new airline before the EU’s Court.
No economic continuity
Key parameters to make sure there is no economic continuity between ITA and Alitalia have been agreed at the end of May between the Commission’s Executive Vice-President responsible for Competition Margrethe Vestager and Italy’s Ministers Giancarlo Giorgetti (Economic Development) and Daniele Franco (Economy and Finance) and are now enshrined in the new business plan of the State-owned company.
ITA will buy assets for its aviation business directly from Alitalia. It will initially operate a fleet of 52 planes (seven of which are wide-body, used for longer-haul routes), but the number is expected to increase progressively to 78 in 2022 and 105 in 2025. 77% of the new aircraft will be of new generation, producing lower CO₂ emissions. The smaller company will for now inherit only part of Alitalia’s slots: 85% of Milan’s Linate airport and 43% at Rome’s Fiumicino hub. In line with its plans to grow over the next few years, ITA will however have the possibility to buy new landing and take-off rights.
ITA will bid in a public tender, instead, to acquire Alitalia’s highly-recognizable brand, which was one of the most contested requirements put forward by the EU to give its green light to the deal. It is all but certain that ITA will manage to get it.
Ground handling and maintenance activities will also be the subject of tenders, which Alitalia is preparing to launch before ceasing operations: while ITA will be able to participate as a majority shareholder in the first case, it can only do so as a minority shareholder alongside other investors in the second case. ITA will not keep the current “Millemiglia” loyalty programme, but will need to start one anew.
Significant cuts will also be made to personnel: ITA will have just under 3,000 employees, but with the aim of reaching 5,500-5,700 over the next four years. At the end of 2025, contracted workers should be around 9,650, compared to the current 10,500. Salaries should remain untouched.
Re-hiring current Alitalia personnel does not represent per se a sign of economic continuity, Vestager assured. “Any new company must hire employees; where they come from is not necessarily an indication of continuity,” she explained. The transfer of staff from the old company to the new one will be managed by an external contractor. National unions for the airline sector have recently strongly rejected ITA’s plan. Layoffs, early retirement, possible relocation to other public companies and additional safeguards are currently examined by the Government to tackle job concerns of those workers who will not find a place in the new company.
Following the presentation of the strategy, ITA has raised its initial capital of 700 million euros in order to begin operating. The new company will start flying in a difficult economic situation, six months later than originally foreseen and with a general uncertainty in the air transport due to the latest development of the pandemic and the increasing number of infections with the highly-contagious Delta variant.
Shortly after it starts flying, it might well be that ITA will need to ask for more public support, which might require Brussels’ approval. Passengers can start buying tickets to travel with the new carrier as early as 15 August. Those who have already purchased flights with Alitalia will not be able to board on an ITA aircraft as of mid-October. They will however receive vouchers, rebooking or reimbursement, in compliance with the EU’s guidelines to protect customers and keep high confidence in the aviation sector.
On 15 July, Italy reached a long-awaited deal with the European Commission following months of talks on the future of its national airline to ensure discontinuity between the old and the new company
