UPDATED: Italy considering alternative options for Alitalia if talks with EU fail

Reading Time: 2 minutes

Italy’s government is exploring alternative plans for the revamp of troubled airline Alitalia should ongoing negotiations with the European Commission fail, Industry Minister Giancarlo Giorgetti said on Wednesday.

“Discussions are under way with (Alitalia’s) special administrators on alternative plans in case the current negotiations … fall through,” Giorgetti told unions during a meeting.

Rome has been in negotiations with the European Union’s executive arm for months over Italy’s plan to restructure the airline through the launch of a new, state-owned company called ITA.

On Tuesday Alitalia trade union representatives urged Italy’s government to abandon negotiations with Brussels over the airline’s revamp, saying the European Commission is favouring foreign carriers over the group.

Criticism over the EU’s handling of Alitalia peaked last week, when Brussels approved France’s contribution to a 4 billion euro ($4.8 billion) support package for Air France-KLM in return for a 4% reduction in its take-off and landing slots at Paris-Orly airport.

A Commission spokeswoman said looser rules for state aid adopted during the pandemic through the EU’s “temporary framework” could not be applied to Alitalia.

“Alitalia has been persistently loss-making and was in difficulty already at the end of 2019, before the COVID-19 outbreak, and thus it is excluded from… receiving aid on the basis of the temporary framework”, the spokeswoman told Reuters.

“By contrast, Air France and Lufthansa were not in difficulty at the end of 2019, which is why they could be recapitalised.”

The Commission is in contact with the Italian authorities, she added, without elaborating.

The EU has asked for ITA to drop the Alitalia brand, give up as many as half of its slots at Milan city airport, and start without the handling and maintenance divisions of the old carrier, sources have said.

ITA’s management had planned to seek partnerships with rival carriers using the negotiating power of Alitalia’s Milan-Linate airport slots as a sweetener.

It had been supposed to buy some of assets of the old Alitalia using part of 3 billion euros injected by the government, and to start flying with less than 50 jets in June.

Alitalia has posted an operating loss every year since 2012, and more than half of its 11,000 employees have been put under temporary layoff scheme because of the coronavirus crisis.