Definitive Take-off of Alitalia as Public Capital Company
Pending EU approval
The definitive take-off of Alitalia (AZ) as a public capital company, Extrema Ratio (last solution), is pending EU Placet (approval) due to strong political command.
In the meantime, its management has been entrusted to Francesco Caio, President, well-known in the world of telecommunications, and Fabio Maria Lazzerini Ceo, former Country Manager of Emirates Airlines and for some time CBO within Alitalia, both believed to be reliable technicians in the airline sector.
Alitalia status symbol or ambition?
Until a few months ago, imagining the return of the Italian state in the management of air transport was considered a luxury for the Arab tycoon, commented the authoritative Italian media. Politicians should not forget the era of status symbols in vogue in the Italian post-second world war period (1945) when showing well-being prevailed over hunger.
The comparison with Italy’s does not dissociate from the past. Status symbol and ambitions are not suited to a country whose disastrous economy and that of the future is very uncertain despite the recent EU monetary concessions, a temporary restorative bonfire without the support of the dying industries and SMEs to keep it from extinguishing. But the current generation of politicians is young, and it is clear that it does not evaluate the past.
Alitalia, the Italian tricolor in the skies of the world
Since its birth, AZ has been the pride and symbol of the Italians who were at the time unaware of their high contribution to its maintenance and oblivious to management waste and of the unlawful assets (public funds) never disclosed to the public.
The leaders of AZ in its golden years (relative to our time) have managed the company giving in costs, and more in hiring staff commanded by political pushes beyond what was necessary for its operation. The accounts in red have always been revived by the state and public opinion was kept in the dark.
Alitalia, chronology of a collapse
From 2006 to 2020 with 14 more years of bad governance, a summary of the failure of the flag carrier can be made in Repetita iuvant (It helps to repeat).
“1996 is the year of AZ’s first significant economic loss: 625 million euros at present values. Lamberto Dini’s government, in command of the company through the I.R.I. (state-controlled industrial investment office), approves a capital increase of 1.5 billion of the old currency “lire.” It was the first in a long series of bailouts. Taxpayers’ money, however, was never enough to restore Alitalia. From 1974 to 2014 alone, the company cost the Italians 17.4 billion euro, according to Mediobanca calculations.
Giancarlo Cimoli is the symbol of Alitalia’s waste. Appointed CEO in 2004 with an annual salary of 2.8 million euros he promised to balance the budget. After 2 years, he was sentenced with 3 other top managers to 8.8 years (6.6 and 6.5 for the accomplices) for bankruptcy fraud which included illicit withdrawal of a few billion euro). He got 3 more million euro as “golden handshake” to leave while AZ was sinking. Not bad for an inmate.
Unable to fight the low-cost competition, AZ sunk from ongoing losses and was doomed to bankruptcy.
At the end of 2006, PM Romano Prodi negotiations with Air France-Klm to sell AZ began. The Franco-Dutch carrier offered 1.7 billion euros to absorb AZ and requested the cutting of 2,100 employees. The coming into power soon after of Silvio Berlusconi canceled this deal in the name of “Italianness” and Alitalia was sold to a group of sharks led by Roberto Colaninno. The so-called “brave captains” offered equal investments to the French, but refused to take on the debts. C.A.I. (Italian airline) was created where AZ’s profitable activities ended. The old company, full of debt and with excess staff, went bankrupt.
Despite the entry of new private individuals, the losses continued. In 2014, Etihad, the Abu Dhabi flag carrier, came to AZ’s aid. Emir Al Nahyan bought 49 percent of the airline. Banks waived part of their claim and 2,251 AZ employees were put on stand-by. James Hogan, Etihad’s number one executive, promised to turn a profit within 2017, a promise that remains unfulfilled.
Carlo Verri, the man who was about to save Alitalia, was hindered by everyone for his recovery projects and died in a car accident after a year of activity.
July 2020: The development minister’s warning
Stefano Patuanelli, Minister of Development, hopes that Caio and Lazzerini (the new AZ leaders) can avoid all the mistakes of the past and not be influenced by political choices that are not compatible with the market (reported the national press) and added: “The history of Alitalia shows that the errors have been more often induced by the public shareholder (the state) rather than by the managers. The real difference with the past is that COVID-19 has zeroed the entire sector, and for this reason, AZ starts at the level of the other European airlines.”
The reality is different: Alitalia restarted with an undue capital of 3 billion euros. An infringement of the law 19/8/16 nr. 175 with regard to companies supported by public funds which says “anyone in financial difficulty before January 1, 2020 cannot receive this type of aid.”
Alitalia, however, proceeds without worries about the future, leaving behind a faulty management of many billions. Furthermore, the reality demonstrates that both shareholders and managers made the same mistakes.
“Even the economy of the major European airlines (but not only) has been damaged by COVID-19, forced to resort to state loans and to implement staff reduction while AZ maintained its exuberant number of human resources and received economical grants.
Two examples of correct government behavior
- Thai Airways International: The up rise of the Thai population against the continued granting of public money to its corrupt management induced the government to take wise provisions.
- The watchful eye of Former Singapore Prime Minister Lee Kuan Yew.
At the origins of the establishment of the MSA, then Singapore Airlines (SIA), from his command post, Lee Kuan Yew thundered: “SIA will not have government subsidies nor will it fly for the prestige of the country. Its conduct must be on a regular commercial basis and must produce economic well-being for the country! Mistakes in commercial choices and opportunities will cost its irrevocable closure. The payment of taxes like any private company is also mandatory without the slightest tolerance for any delays or omissions. The only state concedes: a loan of 31.5 million US dollars in 1974 extinguished with interest in 1978.
The Italian Minister Paola De Micheli
The Minister of Infrastructure and Transport, Paola de Micheli, said in a recent press conference: “We continue to absorb more staff (a practice, perhaps already started), because the modular plan will lead us from the second half of 2022 onwards to have much more long-range flights. And we’ll not apply the suggested staff redundancy.” The need for survival of an entire country is set aside in order to keep alive AZ, considered only a “status symbol.”
Other episodes of bad management in the period 2014-2017 induced AZ to the commissioner for the crime of aggravated fraudulent bankruptcy, false in social communications, and an obstacle to the surveillance functions, a situation that according to Codacons, (The Consumers’ List) has dragged thousands of small shareholders into the abyss for a second time. These, gathered in a class action against Alitalia, have won the case, but have not received a refund yet.
The action of Codacons
The Codacons is ready to challenge Alitalia’s new bailout with public money in Europe after the news of the inclusion in the “Cura Italia” (decree of an article authorizing the creation of a new company entirely controlled by the Ministry of Economy and Finance or controlled by a company with predominantly public or indirect participation).
“This is a real scandal that Europe will have to block,” wrote Codacons, “AZ’s nationalization will entail a huge waste of public money, resources that in this moment of difficulty of the country should be destined for other sectors, and not certainly hijacked to fill the shameful management of the airline.”
Therefore, the Codacons, which recalls how AZ’s bailouts have cost the community another 9 billion in recent years, is ready to appeal to the European Commission to block yet another intervention with public money for the airline.
Mario Masciullo (left) with the MD of Malaysia Singapore Airlines on the apron at FCO Airport Rome after the first Singapore-Rome connection on June 1, 1971.
The author experienced the development of Italian civil aviation from 1960 to 1989. From 1960 to 1967, he was the sales manager for British European Airways for Piedmont based in Turin; from 1968 to 1970, he worked for DSM Northern Italy for East African Airways; from January 1971 to October 1972, he was an institutor of Malaysia Singapore Airlines in Italy in the position of Country Manager Italy; and from October 1972 to November 1989, he was the Marketing Manager Italy for Singapore Airlines.