On Friday 10 September, the European Commission found that Italia Trasporto Aereo S.p.A. (ITA) is not the economic successor to Alitalia and therefore the company is not liable to repay the illegal State aid received by Alitalia. It also validated Italy’s capital injections of 1.35 billion euros into the new company.
Away due to illness, Margrethe Vestager, Executive Vice-President in charge of Competition Policy, was unable to hold a press conference in Brussels on this issue. She has issued a written statement (https://bit.ly/3C36wfZ ) in which it states that “there is an economic discontinuity between ITA and Alitalia. This means that ITA will not be liable for the 900 million euros that Alitalia has to repay following today’s decision” (see other news).
“This decision is perfectly legal”, said an EU source, responding to questions about the political nature of the Commission’s decision.
Economic discontinuity. A number of different factors were looked at in the decision, Ms Vestager explained:
- ITA will take off with a significantly reduced perimeter of activities. It will operate less than half of Alitalia’s aircraft, fly to fewer destinations and abandon a number of loss-making routes. ITA will use a limited number of Alitalia’s take-off and landing slots. Other slots previously used by Alitalia, notably at the congested airports of Rome and Milan, will be freed up;
- ITA will only be able to take over a limited part of Alitalia’s maintenance and ground handling businesses. These businesses will be sold through open and transparent tenders. ITA will only be able to bid for a majority stake in the ground handling business at Rome-Fiumicino airport and will only be able to bid for a minority stake in Alitalia’s maintenance business;
- the Alitalia brand will also be sold in an open and competitive tender to the highest bidder;
-Alitalia’s loyalty programme, ‘MilleMiglia’, will be sold following an open and transparent tender in which ITA will not be able to participate (to avoid direct customer transfers between the two companies);
- ITA will have a more sustainable cost structure than Alitalia in terms of fleet and labour contracts. It will recruit a significantly reduced number of people from the market, including from Alitalia, but under new labour contracts, based on market conditions. It will modernise its fleet through digitalisation and the use of new generation aircraft with lower fuel consumption;
-Alitalia’s public service obligations (PSOs) will not be transferred to ITA and ITA will pay the market price for the Alitalia assets it acquires. Similarly, ITA will not take back prepaid tickets that passengers have already purchased from Alitalia. In this regard, to avoid negative impacts on passengers and to ensure that they remain protected, Italy has agreed to refund prepaid tickets that Alitalia will not have honoured when it ceases operations.
“ITA will therefore be a different company from Alitalia”, concludes the Vice-President.
Capital injections. The Commission has validated the capital injections by the Italian State into ITA: 1.35 billion euros over the next three years (700 million euros in 2021).
The Commission found that the Italian State would receive a return on its investment in ITA that a private investor would accept.
Indeed, ITA’s business plan shows that it will be a viable airline, pursuing a business strategy based on a smaller network of profitable routes, improved cost efficiency, digitalisation and environmental sustainability through a new generation fleet with lower fuel consumption, resulting in lower maintenance and fuel costs.
The Commission found that the expected internal rate of return (IRR) of the investment in ITA would be higher than the cost of equity. This assessment was confirmed by three independent expert reports that analysed the proposed operation. (Original version in French by Lionel Changeur)