Certares has presented an offer of 700 million for the majority of ITA, the reduced branch of the airline
Rome has chosen acquisitions group Certares to be the lucky owner of ITA Airways, the downgraded successor to bankrupt Alitalia. The fund’s partnership with Air France-KLM and Delta Airways should ensure ITA gets better slots and greater access to the lucrative US market. This may prevent the need for more state bailouts, but the Italian government will still have a lot to say.
Outgoing Prime Minister Mario Draghi may have found a way to fill Alitalia’s bottomless pit. The troubled Italian airline has been loss-making since 2000, blowing more than €10bn of state funds in multiple bailouts. Air France, several Italian businessmen, the Poste Italiane PST.MI postal group and the Persian Gulf company Etihad participated in the failed attempts to lift the airline. At one point, Rome even sought support from its national rail operator.
Certares’ offer, which the Italian Treasury chose on Wednesday over a rival bid from shipping giant MSC and German airline Lufthansa, calls for €700 million to be paid for a 50% stake plus one share in ITA, leaving the rest in state hands, according to a source familiar with the situation. Air France-KLM and Delta may buy ITA’s stake later. Rival bidders had offered between €850 million and €900 million to buy 80% of ITA in one fell swoop, according to Reuters.
Both valuations seem excessive, given the airline’s dismal track record and its current size. ITA’s forecast revenue for 2022, of €1 billion, would be around €600 million in sales multiples of its European counterparts. In addition, the company operates only 334 weekly flights, compared to more than 1,000 for Lufthansa and Air France-KLM.
All in all, the Certares offer offers reason for hope. Air France and Delta are already allies of ITA in the Skyteam alliance that allows customers to share airline miles. Going to Star Alliance from Lufthansa would be a disruption. Meanwhile, the enhanced partnership with Delta should allow ITA to establish more long-haul flights in the United States, which is critical if it is to grow a sustainable revenue base.
The Italian Treasury, with its large remaining stake in ITA and its two board members, will retain enough clout to ensure that Rome airport does not become irrelevant, a risk that would be taken if all long-haul flights distance will pass through Paris. The danger is that a future nationalist government will use that power to block any sale of ITA shares, for example to Delta or Air France-KLM. After so many bailouts, Italian taxpayers will want government meddling to a minimum.
