Alitalia is out of cash (again) and Lufthansa stepping up to offer 200 million euros ($223MN). Since when is Lufthansa in the business of losing money?
While Lufthansa has officially said, “We are not commenting on this,” numerous reports have appeared in Italian newspapers this week about Lufthansa’s latest Alitalia investment offer. Reuters coaxed a Lufthansa insider to confirm the proposal off the record.
Ferrovie dello Stato, Italy’s state-run rail company, is leading efforts to find investors to keep the lights on at troubled Alitalia. Lufthansa sent a letter to Ferrovie dello Stato saying it is open to investing in Alitalia, but still questions Alitalia’s priorities.
The two will meet in Germany next week, with Lufthansa reportedly prepared to offer between 150 and 200 million euros.
Delta is also in the hunt, having privately floated the idea of a $100MN rescue package. The Atlanta-based airline takes a “subsidies for me, but not for thee” approach to doing business and would love nothing more than to use its money in concert with the Italian government to squeeze out Air Italy.
> Read More: Hey Delta, Where’s The Outrage Over Alitalia’s New U.S. Route?
Lufthansa Should Know Better
Lufthansa learned a lot from its failed Lufthansa Italia venture from 2009 – 2011. It learned of the perils of the Italian market and how it is tough to compete against a flag carrier the state is always willing to bail out.
In that sense, Lufthansa is not totally foolish to take the “if you can’t beat them, join them” approach. But Alitalia has proved resistance to change over and over again. What makes Lufthansa think its money won’t be quickly digested and Alitalia will still be very hungry? Surely Lufthansa can avoid some of the mistakes that Etihad made, but Etihad provides a rich case study in the inability to change much of anything at an airline set in its ways.
With Delta and Lufthansa potentially entering a bidding war, Lufthansa must guard itself from offering too many concessions. Alitalia does not need concessions: it needs order and discipline.
> Read More: Will US Airlines Now Boycott Alitalia?
> Read More: Dense, Dimwitted Logic From A Deliberately Deceptive Delta CEO
CONCLUSION
Alitalia is poorly run. Unless it is truly deemed a public utility over profit-maker, it needs a partner like Delta or Lufthansa (who itself isn’t without issue) to right the ship. But Lufthansa must resist clever words and promises of reform. Unless it wants to throw money away, it must not only pre-negotiate reforms, but win labor backing for them. 200 million euros is far too much just to keep competitors away.
> Read More: Alitalia 777 Business Class Rome to Los Angeles Review
It’s not about taking over AZ, but more about preventing someone else taking over and encroaching on their turf.
I don’t deem that a credible threat, since no one has been able to make Alitalia work in the past. I also don’t think Lufthansa’s Italian market is so lucrative that it must invest in Alitalia to keep it at bay, especially with budget carriers now competing hard.
I don’t think anyone will make it work in the future either. But they still can be a nuisance for LH (as it can’t really abandon the market).
Italy is hugely lucrative for LHG. Have a look at the number of flights they have there (including Air Dolomiti).
Nobody knows what is going on or is on the table but I think you can be fairly sure Lufthansa doesn’t throw money away for no reason so there must be a return on investment they are eyeing that makes it worth it.
Personally I don’t know on what Alitalia is losing money but I would imagine Lufthansa sees an opportunity to leverage their group economies of scale to fix something here.
Don’t they already have air dolomoti? I flew them last week to Catania. Was pretty nice. Amazing how much difference friendly service and a wine top up on a short flight makes 🙂
Good luck on delta or Lufthansa
Please don’t give the unions and the government a lot money
As an Italian living in Italy, I can tell you this going to be the umpteenth failed attempt to “save” AZ.
LH is asking for 3000 layoffs and apparently, even state-owned Ferrovie dello Stato (afraid this investment might tank its bottom line in the process) agree that the current workforce for AZ is simply unsustainable.
The unions don’t want to hear any of this and they’re confident that any government – left, centre or right – will simply keep funding the company with taxpayer money indefinitely, since no politician has the guts to agree on such a restructuring plan.
With that being said, we’re talking about a company that loses 700k € every day, accounts for only 8% of international passengers coming in and out of Italy and in the last 10 years cost the Italian population more than 10 billion euro.
Most Italians are in favor of killing it once and for all, yet we can’t elect a gov’t that follows up on this wish…
What a weak and unprofessional article!
Full of stereotypes and incorrect information
Not that you can judge from just one bad experience, but taking Alitalia from JFK to Milan (and back) was probably two of the longest check in processes I’ve ever had. The process of checking a bag and getting a seat took 15 min per person. There were 10 agents but the line stretched across the airport. Also, for me Deltas systems didn’t properly sync with AZ and the app and gate agents were worse than AA at its worst. In flight the service was one pass through with cart, once w drinks, the wifi intermittent to completely not working. My inflight system stopped working, this on a newish airbus.
Its not as bad as Spirit, but with Spirit you can (and sometimes do) drive home.