The new Italian airline authorized to take off without Alitalia’s luggage – POLITICO
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New from Italy The airline ITA is finally ready to take off after Brussels offered Italian Prime Minister Mario Draghi a big victory by deciding that it will not have to repay the illegal subsidies granted to its predecessor Alitalia.
The EU competition watchdog concluded on Friday that struggling Alitalia and its newly created state-owned replacement ITA are two separate companies, though the new airline will likely inherit Alitalia’s many aircraft and landing slots, as well as, ultimately, its brands.
At the same time, Brussels ordered the former Alitalia to repay 900 million euros of illegal state aid granted in 2017, but this is a somewhat academic request as the iconic former airline is penniless.
The EU’s conclusion that ITA “is not the economic successor to Alitalia and therefore is not required to repay illegal state aid received by Alitalia”, as Margrethe Vestager, head of competition from the EU, is great news for Draghi.
But Alitalia’s competitors are unhappy and claim Vestager dragged its feet too long on the Italian airline.
“The Commission’s four-year-old € 900 million grant decision is fundamentally meaningless; it just has no effect, ”argued Attila Borsos of the law firm Gibson Dunn, who represented Adria, a former Slovenian airline that lodged one of the complaints triggering the Commission’s investigation.
Considering Alitalia’s cash flow problems, it is highly unlikely that Rome will really be able to recover this 900 million euros.
Either way, it looks like there is a practical way around this.
“If the full amount cannot be recovered, Alitalia must permanently cease all activities and exit the market in order to completely eliminate the distortion of competition caused by the illegal aid,” said a Commission spokesperson. In other words, the fact of exiting the market – as Alitalia will do on October 15 – is already a satisfactory way to remove the negative effect of past aid.
However, as state aid advocate Borsos noted, Brussels could have avoided further damaging fair competition in the aviation market by acting more quickly.
“Italian taxpayers had to keep Alitalia afloat for over four years, and at the same time Adria Airways went bankrupt and ceased operations and other companies like Air Berlin were dismantled because they did not benefit from state aid, ”Borsos said.
It’s also frustrating Alitalia’s rivals who view the likely transfer of assets like airplanes, airport slots and – if the new company wins an auction – the Alitalia brand at ITA as a continuation of the old company.
Ryanair boss Michael O’Leary told Italian newspaper Corriere della Sera earlier this week that he would appeal the Commission’s decision if the ITA was not required to return the money on behalf of ‘Alitalia.
“It is not fair that the transfer of assets to the ITA be done without liabilities, as it would constitute further unfair competition,” O’Leary said.
Ryanair had previously said it would be interested in some of Alitalia’s slots, and O’Leary mischievously said there were plans to launch an offer for the brand – valued, according to Italian media, at 150 million. euros – “but only as a nuisance” to make the ITA pay more (he then decided that Ryanair was “big enough and famous”).
ITA chief executive (and former Alitalia executive) Fabio Lazzerini said his company would “do everything” to win the planned public tender for the Alitalia brand.
Andrea Giuricin, professor of transport economics at Bicocca University in Milan, said the result was welcome for ITA, paving the way for them to bid for the brand and launch on October 15.
But – in addition to frustrating the Italian taxpayer – the long process could have damaged the reputation of the Commission, he said.
“It takes four years to make a decision on the bridging loan… it’s a political decision. And that loses credibility for the European Commission on Alitalia, ”said Giuricin.
“The Commission’s stated aim is to focus on state aid which distorts competition the most. And yet, it allowed Alitalia to benefit for more than four years from a loan which was clearly state aid in a highly competitive sector, ”notes Borsos at Gibson Dunn.
Another EU investigation into a € 400million loan in 2019 is still ongoing, but Giuricin said he expects this to be decided sooner, given the hurdle of l The ITA approval has now been lifted.
Over the years, Italian governments from all political backgrounds have supported Alitalia. Today’s decision refers to two loans totaling 900 million euros granted by the administration headed at the time by Paolo Gentiloni, now European Commissioner for the Economy.
Meanwhile, Rome faces increasing pressure from unions following thousands of layoffs linked to the launch of ITA, a much smaller company compared to Alitalia. Earlier this week, Alitalia workers took to the streets to protest the layoffs. The choice to nationalize Alitalia was taken during the coronavirus pandemic by the government led by Giuseppe Conte and then confirmed by the new Prime Minister, Draghi, the former head of the European Central Bank.
The Conte government initially allocated 3 billion euros to finance the ITA. With Friday’s decision, the Draghi administration received the green light for 1.35 billion euros, of which 700 million should be disbursed this year. According to Brussels, this investment is made at market conditions, which means that “the investment in ITA would give the Italian state a return that a private investor would also accept”.
The Italian government has yet to comment on the Commission’s decisions; but they’re sure to be music to the ears of Draghi, who confessed earlier this year that he considers Alitalia “a family affair, albeit a bit pricey”.
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