Privatization of ITA Airways: Italy chooses the offer of Certares, Air France-KLM and Delta

Rome a déjà investi 1,3 milliard d'euros dans la nouvelle compagnie, qui n'a pas encore gagné d'argent.

Posted on August 31, 2022 at 11:46Updated on September 1, 2022 at 8:47 am

MSC and Lufthansa hit on ITA Airways file post, it was quite unexpected! The Italian-Swiss shipowner and its German ally failed to convince the Italian government in the case of the acquisition of the public company ITA Airways. The Ministry of the Economy announced on Wednesday that it had accepted the offer from the US investment fund Certares, associated with Air France-KLM and Delta Air Lines, with a view to opening exclusive negotiations.

Until now, MSC and Lufthansa have been considered favorites in the race to buy Alitalia’s successor, sparked by the resignation of Prime Minister Mario Draghi. But the US fund’s offer was considered “more in line with the objectives set” by the state, which owns 100% of the company, the ministry said in a press release, without disclosing the amount of the proposal. “At the end of the exclusive negotiations, binding agreements will only be signed if their content is fully satisfactory to the shareholder public”, he stresses.

Air France-KLM will not be in the capital immediately

Neither the amount nor the general lines of the offer made by Certares have been disclosed. However, according to the Italian press, the US fund and its partners have made an offer for almost 56% of ITA, for around 600 million euros, which would be fully paid by Certares. In a press release issued late in the afternoon, Air France-KLM stresses that its participation in the operation, as well as that of Delta, will remain, at this stage, purely commercial, without taking a stake in the capital of ITA. air ways. .

“In the event of the conclusion of this operation, Air France-KLM would become a commercial and operational partner of the Italian airline, within the consortium led by Certares, the press release specifies. Air France-KLM is not investing at this stage in ITA’s capital structure. However, the Air France-KLM group could consider acquiring a minority stake in ITA in the medium term.

a political choice

As a reminder, the Franco-Dutch group cannot acquire more than 10% of the capital of a company in the sector until it has repaid at least 75% of the French public aid received to overcome the Covid-19 crisis. But Air France-KLM has so far only repaid 60% of its state aid. And the group has yet to complete its balance sheet restoration before it can embark on external growth operations.

However, in the medium term, nothing prevents the Certares fund from reselling part of its stake in ITA Airways to Air France-KLM and Delta. Figures have even begun to circulate in the Italian press, which evoke a possible future participation of Air France-KLM up to 10%, as well as Delta, for 5%. Especially since European regulations impose at least 50% European capital in an airline.

Two seats on the board of directors

In this scheme, the Italian State would maintain, no matter what happens, a 44% stake and would have two seats out of the five that will be on the company’s future board of directors. Against only 20% and only one seat in the offer presented by MSC and Lufthansa. The State would also have the right to veto over strategic elections, “as well as the possibility of appointing the president”, indicates the “Corriere della Sera”. An option that most appeals to the coalition of right-wing parties with a chance of winning the legislative elections on September 25. Its members have already expressed their desire to retain control of a national company.

In early August, Giorgia Meloni, president of the far-right Fratelli d’Italia party, which aspires to the head of the Italian government, had called on outgoing Prime Minister Mario Draghi not to rush a decision. As of the legislative elections, “everything can change and the reactivation of our national airline will be the responsibility of whoever governs,” she recalled.

Significant synergies in long haul

However, beyond political considerations, the choice of Air France-KLM and Delta is also one of continuity for the Alitalia heir. Air France-KLM was in fact one of the main shareholders of Alitalia, with 25% of the capital, but also its main business partner for more than forty years, before Silvio Berlusconi’s opposition to the takeover of Alitalia by the French did not lead to divorce. of Air France-KLM in 2015. At that time, the Italian government had preferred a takeover bid (49%) by Etihad, the Abu Dhabi company. But this alternative alliance without any real commercial synergy had fizzled out.

The choice of Air France-KLM and Delta is also the means for ITA Airways to increase its power in the transatlantic market, within the Skyteam alliance and the joint venture agreement founded by Air France-KLM and Delta. “This includes an increased presence on the North Atlantic hub, where Air France-KLM, Delta and Virgin Atlantic operate the largest joint venture, as well as the possibility of building an exclusive Flying Blue France-Air France KLM partnership. , Sky by Delta Miles and Volare by ITA, one of the largest loyalty programs in Italy, for the benefit of the Italian airline’s customers,” Air France-KLM said in its press release.

Privileged access to the Italian market

For Air France-KLM, the anchoring of ITA Airways within the Skyteam alliance is the guarantee of privileged access to the Italian market, the second largest in Europe for Air France. Within the transatlantic alliance, ITA Airways, which only has an embryonic long-haul network, will in fact have an interest in transferring its long-haul customers to Air France, KLM and Delta flights in the US, rather than those of Lufthansa and its subsidiaries.

As for Certares, the investment fund is not unknown in the travel sector. Two years after its creation, the US fund, whose CEO, Greg O’Hara, has dual Greek and Canadian nationality, made a strong entry into the sector in 2014, participating in the acquisition of the American travel agency network. Express. Certares has also invested $4 billion in the Hertz car rental company. In France, Certares is a minority shareholder in the Voyageurs du monde tour operator and in the Marietton network of travel agencies and tour operators.

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