Reports suggest Alitalia may be strapped for cash and luck

As negotiations with the EU stagnate, Alitalia quickly runs out of cash. The airline cannot receive funds from the Italian government until it gets the green light from the EU, leaving the airline strapped for cash. Unless a breakthrough happens soon, Alitalia might run out of luck and time to keep flying.

Alitalia has already started falling behind on its financial commitments, notably by paying all of its employees’ salaries last month. Photo: Vincenzo Pace | Simple theft

Trouble looms

According to a report by Bloomberg, negotiations between the Italian government and EU antitrust chief Margrethe Vestager have failed. The two sides disagree on whether the newly funded airline should receive Alitalia’s brand, assets and key niches or buy them at market rate.

Under the current plan, Alitalia will be owned by ITA, or Italia Trasporto Aereo, and will be owned by the government. The new management plans to completely overhaul the airline and bring it back to profitability. However, the EU has expressed doubts about ITA’s plans for Alitalia and is not convinced that it can be revised.

Alitalia A330-200
The EU has questions about the relationship between ITA and Alitalia and the feasibility of the new plan. Photo: Vincenzo Pace | Simple theft

The European Union demands that the ITA separate from Alitalia. It would mean do not use the name or any bankrupt airline assets and start over. However, Italy does not want to give up key slots at airports like Milan and buy out Alitalia assets like planes and hire staff again.

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Hurry up

Caught in the crossfire is Alitalia itself. The airline has been bankrupt since 2017 and only survives on government loans. However, the latest 3 billion euro ($ 3.53 billion) funding round must be approved by the EU to avoid being labeled “illegal state aid”. Since 2008, Alitalia has cost taxpayers 5.4 billion euros ($ 6.3 billion) to stay afloat.

Without this financial boost, Alitalia runs the risk of running out of cash. The airline only paid its employees 50% of their March salaries due to the financial situation and could run out of funds soon. If that were to happen, the airline would be forced to halt all flights and operations until a solution was found.

Alitalia A320
Alitalia may have to bring all of its flights to a standstill soon if it cannot secure more funding soon. Photo: Getty Images

Italy could also hold back from removing Alitalia due to the risks of missing the lucrative summer season. Starting a new airline, including new staff and planes, by July would be a Herculean task. However, without EU approval, there is little the government can do to help Alitalia at this time.

Lean airline

Under a proposed recovery plan, the new Alitalia will employ 4,500 people and operate only 45 aircraft. This would mean halving the workforce and the fleet in the coming months. Other reports suggest the airline may have an even smaller workforce in an effort to keep costs low. However, until the airline receives clearance to continue with its turnaround, it is running out of time and luck.

What do you think of the future of Alitalia? Let us know in the comments!

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