italy’s planned sell-off of most of its stake in state-owned ITA Airlines may come sooner than later, with final bids in and Italy’s political turmoil pushing the deal forward.
Final bids from the two final potential buyers were received last Monday, after an earlier round of bids was rejected as too low. The new bids also do not match the original target of over a billion Euros, but may be said to reflect the market reality as time goes on. The two bidders are a joint plan by Lufthansa and Italian shipping giant MSC, and a bid by U.S. capital firm Certares, which has ties to AirFrance/KLM and Delta, former close allies of Alitalia.
When Italy’s coalition government collapsed weeks ago, triggering an election, it was widely believed that the caretaker government would postpone the sale for the new government to deal with, but that situation appears to have changed, in part because the value of the asset continues to drop, and in part because a sale now would leave none of the possible election winners with responsibility for the sale, which some of them may oppose.
A long-ago deal in which Alitalia was to be sold to AirFrance/KLM was torpedoed at the last minute by then Prime Minister Silvio Berlusconi, on grounds that Italy’s flag carrier should be locally-owned as a matter of national pride. That decision led to years of continued losses, and it’s unlikely that even the most nationalistic candidates of today want to have a losing air line on their hands. Outgoing PM Mario Draghi has made clear “It is not my intention to leave this decision to the next government.”
ITA was created last year as a successor to Alitalia, which had come into state ownership after those years of losses, turmoil and bankruptcy. The plan was always for ITA, which absorbed many Alitalia personnel and aircraft, to be sold into private hands once started, with Italy retaining a small stake. The deal with the EU that facilitated the transition requires Italy to divest itself.
The Lufthansa/MSC bid would buy 80% of the airline, leaving Italy with a 20% stake, and an agreement giving Lufthansa ‘full entrepreneurial control.’ Lufthansa is anxious to acquire market share in Italy and to enhance connections with its other airlines, which include Austrian, Brussels and Swiss as well as Eurowings. It is a leader in Star Alliance, while ITA is presently a SkyTeam member.
Certares is bidding for 60%, and would leave 40% with the government, as well as more say in operations. If Certares gains control, it would likely work out management deals with its airline partners for actual operations.
