Italy saves ailing Alitalia yet one more time — by nationalizing it

Mar 17, 2020

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The coronavirus pandemic is pushing the Italian government to do something that hasn’t been seen in decades in Europe: Nationalizing an airline.

An emergency decree published on Sunday, introducing billions of euros in measures to help the Italian economy crippled by the pandemic, contains a provision for the state to buy Alitalia. The airline, which hasn’t made a profit since 2002 and has been in bankruptcy for almost three years, would be nationalized in response to the crisis. Alitalia is formally for sale, but with the travel industry in tumoil it’s highly unlikely that anybody will express an interest in buying it before the deadline to present offers on Wednesday. That might leave the government as the only alternative to shutting down.

Unlike other European airlines, which have essentially grounded themselves, Alitalia is still flying a very limited schedule — mostly to bring back Italians stranded abroad — but is in a dire financial situation. After getting 1.3 billion euros in loans since entering bankruptcy, Alitalia is running out of cash, Reuters reported. Italian media outlets are citing a figure of 2 million euros of losses per day, without specifying where that figure comes from.

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According to the text of the decree, the government might create “a new company , entirely controlled” by the Italian Treasury, “as a consequence of the situation caused by the emergency.” This new company might, according to Italian media, take over Alitalia’s planes, crews and flight schedules, while debts and other liabilities would be left for taxpayers to take care of.

“It’s a bottomless pit for the Italian taxpayer,” Andrea Giuricin, a transportation economist at the Milano Bicocca University in Milan, wrote in response to the possible nationalization. “Alitalia has already cost nine billion euros in the past 12 years” in repeated government bailouts, Giuricin calculated.

The European Union generally forbids state aid to companies, considering it an unfair distortion of the market, but does make exceptions. State aid, including outright nationalization, is not allowed “unless it is justified by reasons of general economic development” or part of “general measures open to all enterprises” — a definition which could easily include the emergency cash injections due to the current COVID-19 crisis. 

Italy is not alone in considering such drastic measures.

More: Alitalia returns to San Francisco in U.S. expansion push

Bloomberg reported that the French government is also considering taking a bigger stake in Air France. French Finance minister Bruno Le Maire was quoted as saying that “I could even use the word nationalisation if necessary.”

There were exactly six Alitalia aircraft airborne at 10 a.m. ET on Tuesday. Two were going from Rome to New York, one to Miami, one to Tokyo and one to London, while another was headed to an unidentified destination.

Alitalia is flying a reduced schedule at least until April. The airline says it’s offering one-way flights from the U.S. at a reduced rate to facilitate the return of stranded Italians; one-way fares from New York JFK to Rome in March were as low as $389.

Alitalia says on its site that any passengers holding an Alitalia ticket — identified by a ticket number beginning with 055 — whose flight has been canceled can request, by May 31, a no-fee change, a voucher of the same value valid for one year for any Alitalia destination, or a refund.

Featured photo: An Alitalia 777-200 landing at JFK (Alberto Riva/The Points Guy)

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