IN ROME:ON JANUARY 12th next, a new streamlined, fully privatised version of Italian national carrier Alitalia is due to begin operations. More than two years after Romano Prodi's centre-left government initiated the process of unloading the Treasury's 49.9 per cent share in the carrier, a brave new dawn is about to break in the troubled history of Alitalia. Or is it?
This is hardly the ideal time to start up a new airline company. In early December, Iata (International Air Transport Association) predicted international airline losses for 2009 at approximately $2.5 billion, largely because of what it called a "chronic industry crisis" that has created the "worst revenue environment in 50 years".
Yet, CAI (Compagnia Area Italiana), the 21-member consortium that, in late December, formally took possession of the so called "good" part of Alitialia for a total price of €1.052 billion, has little choice. Given that Alitalia was estimated to be losing €2.8 million a day in 2008, something clearly had to give.
For CAI (and the Italian government), it was a case of "now or never". The alternative was to risk the total collapse of Alitalia with the consequent loss of significant market shares to rival carriers.
The fate of Alitalia has dominated Italian business news for much of 2008. Industry experts have long known that the Italian national carrier was on a very slippery slope. Over the last 15 years, the company has cost the exchequer €15 billion. It can claim the remarkable record of having returned an annual profit just four times since it was founded in 1946.
Perhaps the single biggest problem about Alitalia is that this is an airline that grew up under the wing of the state holding company, IRI, and with a state body mentality where the bottom line was that, whatever the loss, the state would pick up the tab.
At the beginning of 2008, then prime minister Prodi thought he might have resolved the Alitalia mess by agreeing to sell the state's 49.9 per cent holding to Air France-KLM. However, just as the Air France-KLM deal was reaching a delicate phase, the Prodi government fell last January, leading to a spring electoral campaign in which Alitalia became one of the major issues.
Media tycoon and current Italian prime minister Silvio Berlusconi fairly put the cat among the pigeons by declaring during the campaign that, if elected, he would block the Air France-KLM deal. Berlusconi went on to bang a nationalist drum, claiming there were Italian investors all too ready to step into the breach.
Not surprisingly, weeks after Berlusconi's election win, Air France withdrew their takeover offer. From that moment, we were in for a long, hot, ill-tempered and occasionally strike-interrupted Italian summer and autumn. In order to keep his election promise and save Alitalia, Berlusconi lobbied hard to convince 21, all-Italian, private-sector investors, led by Roberto Colaninno, chairman of scooter manufacturer Piaggio, to form a consortium to buy it.
The Berlusconi government even introduced new bankruptcy legislation that allowed for Alitalia to be divided into two parts - one heavily debt-ridden and the other potentially profitable.
In essence, the new consortium, CAI, was offered the brand name "Alitalia", the company's take-off and landing slots, 93 aircraft and a vast range of industry know-how. Furthermore, the new Alitalia would be merged with its much smaller, domestic rival Air One, giving it a dominant position on a number of Italian domestic routes.
Notwithstanding the initially bitter opposition of those trade unions representing Alitalia pilots and cabin staff, opposition that on more than one occasion looked as if it would scare off the CAI consortium, the deal finally went through in late December. The new company will employ approximately 13,500 people (as opposed to the Alitalia-Air One joint workforce of 22,000), will have 148 aircraft and fly to 70 destinations worldwide.
According to Rocco Sabelli, chief executive of CAI, the new Alitalia will have an initial capitalisation of at least €1 billion. He claims it will reach a break-even point by 2010. Can this be true? Much will depend on the arrival of a major foreign partner - Air France-KLM, Lufthansa and British Airways have all expressed interest - that will be encouraged to cough up between €200 million and €300 million for a 20-25 per cent shareholding.
This last possibility has already prompted polemics, with critics pointing out the foreign partner has been tempted on board by the possibility of a controlling stake in the long term. And what about the all-Italian Alitalia?
However, that will be further down the road. For the time being, the new company, which for a period will use both the Alitalia and Air One brand names, could face more serious problems from its pilots, who in the last days of Alitalia have not been shy about adopting work-to-rule tactics.
For the time being, both pilots and cabin staff seem resigned to their fate but the new year may hold some surprises.
For some observers, though, the biggest surprise of the new year is that Alitalia is still there, alive and flying. At times in 2008, this looked highly unlikely.
