Ryanair hindered by Italian plan to avoid Alitalia break-up

Budget carrier has previously said it’s interested in Alitalia’s long-haul business

Italian airline Alitalia went into administration earlier this year. (Photograph: Reuters)
Italian airline Alitalia went into administration earlier this year. (Photograph: Reuters)

An Italian government plan to avoid the break-up of Alitalia potentially hinders Ryanair's bid for the stricken airline.

The Irish budget carrier has previously said it’s primarily interested in the airline’s long-haul business and would only be interested in buying Alitalia if it was radically restructured.

The Italian government is hoping to avoid the break-up of Alitalia by insisting it will give preference to bids for the entire company at the launch of the final stage of its sale out of bankruptcy.

The state-appointed commissioners running the airline yesterday set out the key conditions for tabling bids in the upcoming public tender. They specify offers for all of Alitalia, or separate bids for the airline operations, which includes maintenance, and for its airport ground handling activities.

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Such conditions are designed to prevent would-be buyers trying to carve off lucrative routes or valuable assets, such as key buildings owned by Alitalia, from participating. The conditions state that if two offers are equal, preference will be given to the one for the whole airline.

Alitalia has been run by three commissioners since it collapsed in May, bringing three years of investment by Etihad, the UAE carrier, to a bitter end.

During the past two months, the commissioners have sounded out the market, and have received non-binding offers from at least 10 carriers, including Ryanair, Etihad and easyJet. Based on the interest so far, there is growing confidence inside Alitalia of a successful sale.

The fate of the carrier, which has been beset with problems for decades, is being watched closely across the airline industry, particularly in Europe and the Middle East.

The Italian government agreed to pump €600m in taxpayer funds into Alitalia to keep it afloat for six months, with the goal of selling the whole airline by the end of the year.

Luigi Gubitosi, one of the commissioners, said in an emailed statement yesterday: "We think Alitalia has great untapped potential - and from the market interest, we aren't the only ones." He added: "This potential is even greater if the company remains whole."

Alitalia’s financial troubles were caused from a combination of competition from low-cost carriers and its own high cost base. One of the big questions hanging over the sale is whether buyers - particularly for the whole carrier - will be willing to take on this legacy.

Andrew Lobbenberg, an aviation analyst at HSBC, said: "People coming in with fresh capital would want to see meaningful change. There's no evidence of acceptance of that reality."

But Mr Gubitosi, who has broad powers to transform the airline, said its financial position was already improving and revenues growing.

The sale, managed by bankers at Rothschild, will be open to bidders of all nationalities and consortiums. Private equity firms are also expected to participate. Binding offers are due in October, followed by a period of negotiation until November. Alitalia faces liquidation if it does not find a buyer for the whole company or its main components.

Chris Tarry, an aviation consultant, said: "I'm afraid there's a great disappointment ahead. The brand is important in Italy and you can see how that brand can continue but you need a completely different approach to the operating model."

Copyright The Financial Times Limited 2017