There are indeed those moments when Giorgia Meloni faces reality. The fiery national pride, the patriotic propaganda, the first-the-Italians slogans, the nostalgia for their post-fascist roots, even their dashing pursuit of power—all then evaporate. For a strong right that has been steadily expanding its influence in Italy and Europe for the past seven months, the Roman head of government then shows amazing flexibility. In the case of the Italian state airline, it has now caused a spectacular turning point. You can also call it epochal.
After 50 years on a drip from Italian taxpayers, ITA Airways, the successor to the chronically bankrupt Alitalia, is passed on to Lufthansa. The defense against bankruptcy alone has cost the state a total of 10.3 billion euros since 2008. Now the entry of the German aviation group in Rome put Alessandro Di Nicola in a jubilant mood. The inveterate market economist, President of the Italian branch of the Adam Smith Society, greeted the buyer from Frankfurt last week with a beaming smile. “Welcome and thank you!” Di Nicola said in German. Alitalia was finally rid of, added the Milan business lawyer in Italian.
The costly death throes of the ailing airline are over, at least from his point of view.
Carsten Spohr has also achieved his goal. A week ago, the Lufthansa boss agreed with Meloni’s Finance Minister Giancarlo Giorgetti to take over 41 percent of ITA for 325 million euros. 16 months have passed since his first takeover offer to the Roman sole shareholder. From January 2022 onwards, the Lufthansa boss had repeatedly made new attempts and extended the negotiation deadlines several times. Now, as soon as Lufthansa has gotten the loss-making state company out of the red, Spohr would like to increase the stake in two further steps and take over all the remaining shares. The purchase price for the Alitalia successor has thus increased to a total of 829 million euros. With the investment, Lufthansa has secured control of Italy’s only fourth-largest airline. Because the Roman airline is little more than a shadow of itself.
Low-cost airlines have long spread in Italy
Since the liberalization of European air traffic in the 1990s, the ex-monopolist’s market share has gradually fallen below ten percent. The three foreign low-cost airlines Ryanair, Easyjet and Wizz Air now mostly share the lucrative flight business of the large industrial and holiday country. The crash is the price that the country paid for the governments, parties, trade unions, corporations, clientele and incompetents who dictated to the airline manager paid. For a long time one could also see the epitome of Italy’s decline in the debacle.
So now the entry of Lufthansa is causing a cut. Lufthansa boss Spohr spoke of a “win-win situation” in Rome. Italy, ITA and Lufthansa – all should benefit from the integration into the German group.
Ironically, the right-wing nationalist government of Giorgia Meloni has ended the ongoing drama surrounding Alitalia. She succeeded in what Mario Draghi had failed to do shortly before he stepped down as head of government. Meloni’s predecessor wanted to sell ITA to Lufthansa a year ago. When Draghi fell in July, the sale was actually a foregone conclusion. However, in August the Ministry of Finance sorted out the offer from the highly favored bidder and gave preference to the American fund company Certares.
A month later, Meloni won the elections. In the opposition, the right-wing populist had always set herself up as the protector of the ailing state company and vowed that she would not let any foreign company buyers into the country. Especially not Germans, against whom she declared that she had a particularly strong aversion. “The left has decided to plunder a strategic national asset in order to maybe sell Alitalia to the Germans of Lufthansa tomorrow,” she rumbled on October 14, 2021. Now Meloni, together with Finance Minister Giorgetti of the Lega, has pragmatically left the freed from a flying money-destroying machine.
Her confidant Antonino (“Nino”) Turicchi, whom she installed as President of ITA last November, praises the agreement with Lufthansa to the skies. An industrial partner has been found who believes in the project and is willing to invest heavily. “This has never happened before in the history of the national airline,” Turicchi said in an interview with the Milan daily Corriere della Sera. Wasn’t ITA sold off? Not at all, replies the state manager. After all, Lufthansa cannot be expected to compensate for the losses that have occurred since ITA was founded in autumn 2021. “There was no queue of people offering €325m in front of my door,” he said.
Even under the new name ITA, the airline remained a loss-maker
Carsten Spohr sounded extremely optimistic at the press conference in Rome. ITA has moved far away from the old, ailing Alitalia through a far-reaching restructuring and has become “a competitive company of the right size”. However, the situation is not quite so rosy today. The airline remained a loss-maker even under the new name. After starting on October 15, 2021, ITA made losses of almost 650 million euros in the following five quarters. Added to this is a negative operating result of 151 million euros in the first three months of this year. The bloodletting has not yet stopped after losses of 14.5 billion euros, which had been incurred at the old Alitalia since 1974. “Lufthansa will still have a lot to do,” says Di Nicola.
On the other hand: The potential to win back lost sales with a strong partner behind you and thus make profits for the first time in this century should be there. No national provider in Europe has such a small market share in its own country as ITA, said Spohr in Rome. It sold 27 percent of tickets on domestic flights in the first quarter and only 4.9 percent on medium- and long-haul routes. That’s why the Roman side is suddenly looking forward to the rapid integration into the Lufthansa Group. “We will be able to achieve enormous synergies on a commercial, operational and strategic level,” Turicchi rejoices. “With its investment in Italy, Lufthansa will achieve significantly better results than with its previous acquisitions,” says the ITA President.
The passengers should also benefit from the German-Italian merger, which the EU Commission still has to approve. “The strengthening of ITA finally creates real competition on the Italian market,” Spohr campaigned for the deal in Rome. In fact, that would be welcome. Some of the low-cost providers have assumed a monopoly position there. ITA and Lufthansa left the connection between Rome and Berlin entirely to the low-cost airlines. How about an alternative to the fully booked and expensive Ryanair flights between the two capitals?