Lufthansa CEO on Alitalia: “We need the right partner and restructuring”
The Alitalia case returns with concerns over some of the critical activities of the Italian economy. The economic daily Sole 24 Ore reports: “Carsten Spohr [CEO of Lufthansa] explains the plan on Alitalia. The German carrier hypothesizes that Alitalia could have 90 planes (today they are 113) if it makes a ‘realistic’ reduction in costs. The employees of Nuova Alitalia (the new company) would be 5-6,000 (today they are 11,500). The handling should be sold, a partner for maintenance.
“The basic conditions wanted by Lufthansa to invest in Alitalia – profound restructuring and liquidity to meet the extra costs of at least one billion euros (born by the Italian government); Lufthansa would only be interested in the ‘aviation’ part of Alitalia, not the ground services and maintenance. This would cause 4,700 redundancies.
“A cut of 23 planes from the fleet and a drastic overhaul of the non-profitable routes are also planned. Lufthansa is interested in the hub of Rome Fiumicino that the Germans aim to transform into a strategic hub for South America and Southeast Asia. It will be up to the single commissioner and the unions to decide how big AZ must be and how many sacrifices they are willing to bear.”
Lufthansa Managing Director Carsten Spohr explained: “For Alitalia to have a long-term future, it is important that it has the right partner and the right restructuring. This is the logic that is illustrated when I spoke with the Italian ‘players’ in the last few weeks .”
From Germany on the Lufthansa line: “First the restructuring. Then the commercial partnership. Only at the end of the journey, if Alitalia is profitable, will the company be purchased.”
Contact with Patuanelli and Leogrande
The German airline is playing all its cards to take control of Alitalia, if possible, without risking even one euro. Spohr in recent weeks met with the Minister of Economic Development, Stefano Patuanelli.
The contacts are favored by the role played by Joerg Eberhardt, president and CEO of the subsidiary Air Dolomiti based in Verona. Lufthansa also had contact with the new commissioner chosen by the Italian government, Giuseppe Leogrande, and with other politicians, in particular the M5S (political party) Senator Giulia Lupo.
Fleet reduced to 90 aircraft
The New Alitalia hypothesized by Lufthansa, according to sources of the German group, could have a base of 90 planes, provided, however, there is a “realistic” reduction in costs. In recent months Lufthansa had proposed a more drastic plan, with 74 planes. The rise to 90 aircraft is, however, conditioned by a cost cut.
Alitalia’s fleet of 118 aircraft at the end of 2018 is decreasing to 113 by the end of this year, due to the return to the owners of Airbus of the 320 family who have reached the end of the lease. The Germans are only interested in passenger and freight transport activities, including “line maintenance,” the lightest maintenance, but not the rest of the maintenance nor the handling of Fiumicino. With fewer planes, the new Alitalia would make fewer flights and fewer routes than today.
Workforce for 5-6,000 employees
This means that, according to the assumptions made by Lufthansa but not officially declared, the new Alitalia could have 5-6,000 employees, compared to the current 11,500.
Lufthansa has clarified that they are not interested in handling the Fiumicino ground services in which there are approximately 3,170 workers. This activity should be divested. According to Lufthansa, buyers can be found without difficulty.
One hypothesis is that handling could go to Swissport. Aeroporti di Roma, operator of the Fiumicino airport, controlled by Atlantia, cannot be excluded.
Trade alliance by May 2020
There must be a reduction in costs in the first place, says Lufthansa. The German company requests that the lawyer Leogrande immediately start a restructuring. Only after a few months – not in January, but probably by May 2020 – would be available to make a commercial alliance to bring Alitalia into its network which also includes the American United and other partners in Asia, in particular Air China and the Japanese Ana.
Purchase not earlier than 18 months
Lufthansa could consider the purchase of Alitalia only when it has demonstrated that it has the accounts in surplus and is able to grow. For this to happen, it would take at least 18 months, in the meantime, the Italian state should finance the company, which this year will lose about 600 million euros, according to estimates.
Partnership for North America
Lufthansa claims that it could offer Alitalia a better commercial partnership than current ones both in North America and in Asia. Spohr believes that Alitalia’s transatlantic joint venture with Air France-Klm and Delta is not going well because it limits the possibility for Alitalia to increase flights.
Lufthansa says his North Atlantic alliance with United allows those with lower costs to increase flights.
The previous Swissair
The recipe that the Germans repeat is: first Alitalia must shrink in size, then it can grow. In Frankfurt, the former Swissair precedent is remembered: when the new company, Swiss, was taken over by Lufthansa, it was half of the old Swissair left with the planes on the ground in October 2001, today it is bigger than then.
For now, Lufthansa does not put money on the plate. It gives the line of restructuring and awaits the moves of Leogrande and his government. The new commissioner has not yet taken office, he has not even been officially nominated.
It will be up to Leogrande to restart the transfer procedure. In which in addition to Lufthansa there may be other suitors, including the American Delta.