Published on August 31, 2022 at 11:46Updated on Sep 1, 2022 at 8:47 am
MSC and Lufthansa beaten on the post on the ITA Airways file, it was rather unexpected! The Italian-Swiss shipowner and its German ally failed to convince the Italian government in the matter of the takeover of the public company ITA Airways . The Ministry of the Economy announced on Wednesday that it had accepted the offer of the American investment fund Certares, associated with Air France-KLM and Delta Air Lines, with a view to the opening of exclusive negotiations.
MSC and Lufthansa were considered favorites so far in the race to buy the successor to Alitalia, launched by the resigning Prime Minister Mario Draghi . But the offer from the American fund was deemed “more in line with the objectives set” by the State, which owns 100% of the company, the ministry said in a press release, without revealing the amount of the proposal. “At the end of the exclusive negotiations, binding agreements will only be signed if their content is fully satisfactory for the public shareholder”, he underlines.
Air France-KLM will not be in the capital immediately
Neither the amount nor the outlines of the offer made by Certares have been disclosed. However, according to the Italian press, the American fund and its partners have made an offer for nearly 56% of ITA, for around 600 million euros, which would be fully disbursed by Certares. In a press release issued at the end of 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 Airways. .
“In the event of conclusion of this operation, Air France-KLM would become a commercial and operational partner of the Italian airline, within the consortium led by Certares, specifies the press release. Air France-KLM is not investing at this stage in the capital structure of ITA. However, the Air France-KLM group could consider taking a minority stake in ITA in the medium term.
A political choice
As a reminder, the Franco-Dutch group cannot take 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 reimbursed 60% of its state aid. And the group must still complete the restoration of its balance sheet, before being able to embark on external growth operations.
Nevertheless, in the medium term, there is nothing to prevent 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 evokes 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 retain, whatever happens, a 44% share 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 put forward by MSC and Lufthansa. The state would also have a right of veto on strategic choices, “as well as the possibility of appointing the president”, indicates the “Corriere della Sera”. An option that appeals more to the coalition of right-wing parties likely to win 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, who is aiming for the post of head of the Italian government , had summoned the outgoing Prime Minister, Mario Draghi, not to hasten a decision. From the legislative elections, “everything can change and the revival 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 that of continuity for the heiress of Alitalia. Air France-KLM was in fact one of Alitalia’s main shareholders, with 25% of the capital, but also its main commercial partner for more than forty years, before Silvio Berlusconi’s opposition to the takeover of Alitalia by the French, did not lead to divorce from Air France-KLM in 2015. At the time, the Italian government had preferred a takeover offer (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 on 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 axis, on which Air France-KLM, Delta and Virgin Atlantic operate the largest joint venture, as well as the possibility of building an exclusive partnership between Air France’s Flying Blue France-KLM, Delta’s Sky Miles and ITA’s Volare – one of Italy’s largest loyalty programs – for the benefit of customers of the Italian carrier,” Air France-KLM said in its press release.
Privileged access to the Italian market
For Air France-KLM, the anchoring of ITA Airways in the bosom of 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 United States. States, rather than those of Lufthansa and its subsidiaries.
As for Certares, the investment fund is far from unknown in the travel sector. Two years after its creation, the American fund, whose CEO, Greg O’Hara, has dual Greek and Canadian nationality, made a strong entry into the sector in 2014, by participating in the acquisition of the network of travel agencies American Express. Certares has also invested $4 billion in car rental company Hertz. In France, Certares is a minority shareholder in the tour operator world travelers and the network of travel agencies and tour operator Marietton.