Chinese airline should buy Alitalia to make of Rome its hub to serve Africa and Europe

I don’t know what the “patriots” were expecting when they invested copious resources in Alitalia.  Being capable and experienced businessmen, I don’t think they anticipated a lucrative return on their investments, given the difficult conditions in which our flagship airline found itself at the time.  Today, of course, our problems have surfaced, and the investors are inevitably searching for a rapid exit.  A challenging exit because Air France—the only player willing to acquire Alitalia for a discrete sum—is now reluctant to shell out even a small fraction, finding itself navigating troubled waters as well.  A company with excess production capacity being forced to unload its own personnel is not prioritizing the purchase of another.  Additionally, Air France has brought alternative strategies forward, and most importantly, it looks at Alitalia’s current condition with concern; at this point, Alitalia has become a regional company with growing losses that obligate it to reduce its network and subsequently face ever rising fixed costs.  Alitalia, in business terms, is fighting against the so-called “senescence effect,” which obviously ends with the death of an enterprise.

Having had governing responsibilities during the negotiation period with Air France, I can remind patient readers that these were preceded by deep contacts with other companies, among which Lufthansa was more accustomed to possessing a plurality of traffic poles (so-called “hubs”), and therefore presumably more respectful of Alitalia’s autonomy.  Despite the management’s favorable inclination and a presumed positive response from Angela Merkel, after a long inspection in Rome, Lufthansa’s supervisory board decided that the union situation was too difficult to involve itself in a successful redevelopment.

Other talks were undertaken with Asian companies, in particular Air China, appointed by the Chinese government to reflect on the eventual convenience of a tie with Alitalia.  Margins of convenience existed for both possible parties.  China was interested in an entry into Europe and an African hub, where China has growing business relationships.  The Italian interest was symmetrical: return to being a bridge to Africa and the first landing point for millions of Chinese tourists visiting Europe.  It’s enough to remember that in the past few days a classified ad appeared in a French newspaper seeking 600 sales women capable of speaking Chinese to serve the hundreds of thousands of tourists that disembark at Paris’ airport.  Air China demonstrated itself to be positively interested in the agreement, but added that it didn’t feel ready yet and would need at least three more years to be able to manage such a complex transaction.  I references this episode not because there are signs that that interest still exists—many things have changed since then—but simply to underscore that Alitalia’s destiny must be decided in the interests of the company and the country to which it is tied.  Therefore, the choice of partner must be guided by a long-term strategy and not simply by promises that cannot be upheld over time or by interests foreign to those of the company.

Alitalia’s situation has deteriorated further with respect to six years ago not only because of the reduction of its presence in European and intercontinental routes, but also because of a marked weakening of the national market, assailed by low-cost airlines and competition by high-speed trains, especially the Mila-Rome tract, which constituted its strong point.  The losses have surpassed a point of no return and the choice between failure and marriage cannot be postponed.

Despite the disastrous financial situation and a tradition of complicated work relationships, Alitalia can bring a dowry that cannot be ignored: a potential entry and exit market for a country that is one of the major traffic generators within Europe.  It is only in this perspective that we need to choose a partner, knowing well that alone, Alitalia can do nothing but die immediately.  Even more importantly, we are aware that if it falls in the hands of a company set on centralizing the majority of traffic generated in Italy in its own country, that company is destined to a longer and slower albeit equally certain death.  And, as a consequence, they will need to reshape Rome and Milan’s airports.  Even now wealthy Italian provinces are forced to layover in Paris, Frankfurt, London or Munich for intercontinental flights, where specific parts of the airport dedicated exclusively to flights to Italy exist.  Do we really need to resign ourselves to not even having a strategy for deciding which partner to entrust Alitalia’s destiny with?