Pen de Dama – Michael O’Leary’s new challenge

Michael O’Leary mobilized his leaders to take advantage of the deadlock in the Italian air market with the announcement of the disappearance of Alitalia on October 15 and the creation of its successor, the new public airline ITA (Italy Air Transportation) . The eccentric Ryanair founder greeted him with one of his usual swear words: “Alitalia is a shitty company and ITA is going to go bankrupt too.”

Ryanair has a vested interest in buying some of Alitalia’s assets such as take-off and landing rights – the famous slits– at Milan and Rome airports. The Irish airline has recently opened new bases in several cities around the country and its aim is to expand very quickly, taking advantage of the fall from grace of the historic Italian airline. Italy accounts for 32% of Ryanair’s business and the airline’s market share low cost in the transalpine country, it reaches 28%.

Ryanair executives are lobbying the European Commission to ensure that Alitalia’s sound assets do not go directly to the new ITA, but go out to tender and do so at market prices. State-owned ITA has submitted a binding offer for Alitalia which must be accepted by the bankruptcy administration, but it is unclear what will happen to the planes, flight rights, maintenance divisions, ground handling and customer and baggage management. . The future of the Alitalia brand, well known worldwide and valued at 200 million, is also unknown.

ITA – which will receive a public injection of 1,500 million – wants to start operating on October 15 with 52 planes, half of which are now owned by Alitalia, and with a workforce of 2,800 employees, of whom 490 would be pilots. This represents a drastic reduction, since Alitalia has 10,500 workers, including 1,350 pilots. ITA plans to respect the pilots’ salaries, but not the rest of the staff because the flight attendants will see their salaries reduced by 20%. The change in working conditions will cause a major social conflict – the first strike has already been called on September 24 – which will have a very negative effect on the start-up of the airline.

Ryanair intends to take advantage of this turbulent situation and its managers have encouraged ITA to stay on the long-haul lines and to leave the short and medium lines to the Irish company. “We – said Eddie Wilson, CEO of Ryanair – we facilitate flights within a country at low prices, while full-service airlines like Alitalia, in addition to receiving enormous help from their country, are forced to charge low prices higher than customers because they do not know how to compete on costs”.

Wilson is right to say that Alitalia has not been able to adapt to the liberalization of the European air market despite the multi-million dollar aid it has received. Other similar incumbent carriers either merged with other airlines, such as Air France and KLM, or joined larger groups such as Iberia, which became part of IAG.

The sad end of Alitalia after 75 years of history is the result of a commercial failure both in terms of mismanagement and waste of public money. Italian governments of all political persuasions have repeatedly tried to privatize it, and the Arabs (Ethiad, the airline of the United Arab Emirates), French (Air France) and Dutch (KLM) have also tried to revive it without success.

Alitalia first took off in 1947 as a flag carrier and its planes carried the popes and stars of the world’s golden years around the world. the good life, which has made the company a sort of emblem of Italian excellence. Since Paul VI began international pastoral travel in 1964, all of his successors have flown with this company.

Alitalia was a public company until January 2009, when it was privatized under pressure from European authorities and the rest of the airlines that had ceased to belong to their governments. The Italian Prime Minister at the time, Silvio Berlusconi, pulls the strings and promotes a consortium of private investors whom he asks for a service to the country.

But the eruption of the airline market low cost Alitalia was caught off guard and unable to respond to the challenge as companies such as Ryanair and easyJet cut routes that until then had operated almost like a monopoly. The losses came, the millionaire public aid faded, and the hitherto patriotic shareholders fled in terror. Bailout attempts continued until 2017 when it went bankrupt.

Brussels, which opened several files to Alitalia for public subsidies, gave it the coup de grace by deciding a few days ago that it had to return 900 million in illegal aid to the Italian state.

The Hostile takeover of Ryanair to take over the activities of Alitalia comes at a turbulent time for the sector because the other major airline low cost, easyJet, is harassed by WizzAir. The airline of Hungarian origin, listed in London, launched a takeover bid on easyJet and defended itself with a capital increase of 1,400 million euros. In its day, IAG is also a potential buyer of easyJet, although the group that owns Iberia and British Airways is now in the process of buying Air Europa.

The airspace is full of commercial bustle.

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