New Alitalia, here is the letter from the European Union that risks blocking the operation

Nine pages full of questions, and stakes, on the new Alitalia operation, which is called Ita. A letter dated 8 January – which L’Espresso publishes in full – sent by the European Commission to the Conte government, which in fact risks blocking one of the most important operations: the rescue of the national airline with 3 billion euros public. But the suspicion that it is just “a simple corporate transfer operation without discontinuity with the old company” worries Brussels, which asked Italy for guidance by putting: “The new company cannot be called Alitalia in any way or recall this brand , slots must be sold and the entire Millemiglia program cannot be transferred to the new spa ».

The letter poses questions that already contain the answer. A letter that can postpone the start of the new company, scheduled for April. Much depends on Conte’s government and the Alitalia commissioner, Alessandro Leogrande, who must make up for lost time, immediately put the old company on the market, in pieces, and allow Ita of the managing director Fabio Lazzerini to take what is needed in a way that there is no direct passage as Brussels fears.

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The European Commission’s letter, however, begins with a broad preamble: «The Commission must establish whether the NewCo is in economic discontinuity with Alitalia. This test is based on the criteria identified in the relevant Court of Justice precedents. These criteria consist of the market price, the identity of the shareholder or shareholders of the NewCo, the object of the sale (including the assets, personnel and contracts held by the NewCo), the economic logic of the transaction and the moment in which it takes place. the transfer… Secondly, the planned investment in the NewCo must be market compliant. In other words, a private investor operating under normal market economy conditions should and could have made the investment in question. ‘

After the preamble is there‘list consisting of 62 requests for clarification. We mention the main ones. For example on the “economic discontinuity»:« As discussed on several occasions in the past, the case team believes that the following would help to ensure discontinuity in this case: the assets should in principle be sold through an open, transparent, non-discriminatory and unconditional offer; the NewCo is not expected to maintain combined aviation, ground handling and maintenance operations. It should focus on the aviation business. Ground handling and maintenance activities should be sold separately to third parties; a number of slots should be abandoned at congested airports; the Alitalia brand must not be maintained by NewCo, as it is an emblematic indicator of continuity. Alitalia’s loyalty program should not simply be transferred to the NewCo. Also in this case a tender is preferable to guarantee discontinuity ».

With three billion euros of public money, the state is trying to save the national airline. Meanwhile, it has not yet been possible to find a location for the new company. Fiumicino will be an intercontinental hub, Malpensa cut off.

And again on the “NewCo routes, in comparison with the Alitalia routes”: “According to the draft of the industrial plan – he writes to the Commission – Ita’s strategy would be to focus on the main long-range markets, maintaining overall capacity by rationalizing unprofitable domestic routes and expanding to selected European markets. In light of the above, please answer the following questions: A. How will ITA organize its route focus strategy with a positive contribution to the network? How will it identify the routes in question, particularly the national ones, where there is strong competition with low cost carriers? Did ITA carry out a preliminary market analysis of the competition on national routes? B. Explain how this strategy differs from the normal season-to-season route selection that Alitalia operated between 2015 and 2020. C. Indicate in detail which long-haul routes ITA will focus its operations on and which these are the long-haul routes already covered by Alitalia that ITA will not undertake. Please indicate which are the main strategic routes to be launched in 2021. Please also justify the sources, calculations and anticipations of the demand for long-haul flights, on which ITA will base its industrial strategy. D. Provide an analysis (Excel) of profitability route by route indicating all the routes served by Alitalia in the period 2015-2020 (for years) with information on passengers, number of flights, variable costs, fixed costs and overall profitability. Also provide your estimates on the expected profitability of each route for ITA (on the same disaggregated basis) and reconcile the profitability of Alitalia in the period 2015-2020 and the expected profitability of ITA for 2021-2025; E. Indicate in detail which national and European routes, already covered by Alitalia in 2015-2020, which will not be covered by ITA operations and the reasons for these choices (profitability, strategy, etc.) “.

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The questions on the «Ita hub strategy and the yield of slots in congested hubs»:« We understand that Alitalia has accumulated substantial losses and lost market shares, in particular due to the exploitation of three competing hubs (Fiumicino and Malpensa for the long haul, Linate for the short / medium haul). We also understand from the draft Business Plan that ITA’s strategy is to maintain a multi-hub strategy by maintaining its hubs at Fiumicino and Linate (using the latter mainly for intra-European traffic). Please explain in detail the rationale behind this strategy, providing any evidence to support its discontinuity with the previous multi-hub approach by referring to the traffic and share of revenues generated in each of the three airports in 2015-2020 in the case Alitalia and the projections for ITA for the period 2021-2025; B. As mentioned above, one of the indicators of economic discontinuity is the delivery of a significant number of slots at congested airports. The draft business plan indicates maintaining control over Linate and Fiumicino slots as one of the central elements of ITA’s overall strategy. More generally, the draft industrial plan does not indicate whether and to what extent ITA intends to give up the slots in congested airports “.

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A very delicate paragraph of the letter concerns the personal: «We learn from the draft of the industrial plan that Ita will start in 2021 with 5,200-5,500 employees. We understand that this staff comes from the current Alitalia. Please explain on what basis, under what type of agreement and under what conditions Alitalia staff will be employed. In particular, explain whether Ita will take over the existing personnel contracts and under what conditions. Please also indicate what will happen to Alitalia employees who will not be taken over by Ita in 2021, specifying in particular whether they will be fired or not. Please also provide information on the number of Alitalia employees who actually worked in the period after March 2020 on a monthly basis; B. It is clear from slide 51 of the draft Business Plan that the number of ITA employees will reach levels comparable to those of Alitalia already in 2023 (8700/9100 employees). Indicate on the basis of which elements and which processes the decision to increase the workforce will be made. Please provide a detailed description of the selection process’.

Doubts of Brussels also on the vehicle maintenance and the industrial plan presented by Ita: «As regards maintenance, it is clear from the draft of the industrial plan that Ita plans to entrust maintenance to a company created ad hoc and 100% controlled by Ita. This company will provide maintenance services at market prices. Please indicate the economic and strategic reasons for not acquiring maintenance services on the market from third party suppliers ».

Finally, on the Alitalia brand, the EU Commission asks the government to “provide an estimate of the value of the Alitalia brand and also explain whether Ita intends to acquire the brand at market price and if this market price would result from an offer”.

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Margrethe Vestager, Commissioner for Competition, answered a question from a Romanian parliamentarian. And he promises that Brussels will monitor Lazzarini’s transition to “Ita”. The EU awaits the industrial plan and, in the case of state aid, is ready to punish Rome. “A favor to the French and the Germans”, denounce the Italian trade unions

In general for the Commission at this time “the investment (capital injection) planned by Italy in Ita may raise concerns regarding state aid as it is not clear whether it will be compliant with the market. We ask you to provide details on the return on investment envisaged for the Italian State in the capital structure envisaged in the Industrial Plan project. Provide adequate benchmarks and rationale demonstrating why the mentioned investment would be acceptable to an investor operating under normal market conditions’.


Source: Rss l'Espresso by espresso.repubblica.it.

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