Alitalia: the time for saving companies that burn cash is over!

In the complex Italian economic context, the last few weeks have been marked by the explosion of the situation of the Italian flag carrier Alitalia. What has happened, it has given rise to numerous scenarios. Moreover, the subjects involved are many, both public, such as the Italian Ministry for economic development, and private, such as the two major Italian banks Unicredit, Intesa Sanpaolo that have invested several million euros in the company in the past.

Alitalia is not a company like the other one, because of its history made of failures and savings. However, the old problems, that have always affected the company, have never been deleted. Historically, the problem of Alitalia have been both political and economic.

On the one hand, the short-term policies adopted by governments, that were just interested in using Alitalia to create public consensus and to place friends or “friends of friends” in the management, usually with complete inability in guiding a company, above all in a complex and changing industry like the airline one.

On the other hand, the economic and financial perspective has always been dramatically negative. As a matter of fact, Alitalia arrived to burn out its all entire funds at the end of the last year: the equity of the company has been heavily affected by the losses occurred during the industrial plan for the two-years period 2015-2016, that arrived to a cumulated amount of 600 million euros. According to the plan, the losses should have been 250 million, and so we are dealing with 140% more. Another information, useful to describe the financial distress of the company could be the EBIT (Earnings before interests and taxes) for the year 2016 that has been -300 million euros.

The 12.500 employees on last 25th April reject with a large majority the new industrial plan for trying to save the company. In this way, Alitalia entered the process for special administration, and a bridging loan of 600 million euros was needed to lead the company at least for six months in order to find a buyer.

During last week, the European Authority has approved the loan, and it seems possible, thanks to the revenues coming from the forthcoming summer season, that have traditionally given rise to a positive quarter for Alitalia, that the company could also arrive after the six months provision released by the Italian government.

At this stage, we are able to define three possible scenarios for the future development of the Alitalia history.

Firstly, a solution that would follow what has happened for Blue Panorama, an airline companies created by Franco Pecci. This company represents something really strange, because in five years of special administration, it has never missed a flight. Blue Panorama in 2016 it was able to achieve 200 million euros of turnover with 20 million of operating margin and financial gossip says that even Giovanni Tamburi is interested in entering in the capital of the company.

Secondly, the designation by the Italian government of the former Ferrovie dello Stato’s CEO, Mauro Moretti as the “restoring man” of Alitalia. As a matter of fact, he has a deep knowledge of the transportation industry, given his past experiences. Moreover, he is appreciated by the market because of his activity in managing Finmeccanica, now Leonardo, for which it has not been reappointed due to the seven years sentence for the 2009 Viareggio disaster.

However, this solution seems to be far from reality, since yesterday  the Italian Ministry for economic development has chosen the three special commissioners. Luigi Gubitosi will manage the operating activity of the company; Enrico Laghi, will be in charge for the relationships with the Government and the legal aspects; and Stefano Paleari, whose nomination has been recommended by the Transportation Ministry, is a university professor and an expert in air transport.

Now, for Alitalia, it is not the moment just for good accountants. As a matter of fact, it is time for an extremely pragmatic and determined person, who is able to rebuke employees, and to deal with Unions. Actually, the formers have always lived with too many benefits and too high salaries, the latter ones, unfortunately, use their power to fight useless battles, and are not able to evolve into modern structures able to understand the real needs of workers.

Thirdly, the sale of Alitalia to a buyer interested in benefiting of its valuable assets: the fleet of 120 planes, 80 destinations, such as Seoul, Beijing, Mexico City, and L’Avana. According to the most recent news, there are some airline companies that seem to be interested in trying to get some values from Alitalia. At first, Lufthansa, in order to create a new rebirth history following the experience of SwissAir or Brussels Airlines. Then, of course, EasyJet and Ryanair, that could benefit from the important presence of Alitalia in the major Italian airports, Rome, Milan and Venice.

In the opinion of the writer, Alitalia cannot be saved another time with funds coming from the Italian government and the company cannot be nationalised. The time for saving burning through cash companies is over, and for this reason, the failure would be a solution too. Rather, the failure should have been a solution adopted long time ago. Actually, before the several attempts for saving the company, and before millions and millions of euros have been burnt by managers that thought that Alitalia was like Opera Pia, one of the most important beneficial institutions in Italy.

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