LUFTHANSA Sets Its Focus On Alitalia But Should Expect Disappointment

LUFTHANSA Sets Its Focus On Alitalia But Should Expect Disappointment

by | Oct 16, 2017 | Alitalia, Corporate, Lufthansa | 2 comments

In what was basically a poorly kept secret until just a few days ago when Carsten Spohr suggested that Lufthansa would be interested in Alitalia, Lufthansa today confirmed it has submitted its proposal.

In it, Lufthansa is offering upwards of 500mm Euro to buy  Alitalia out of bankruptcy.   The 500mm offer is asking for all of Alitalia’s aircraft, employees and airport slots around the world.   However, LH said it would have to let 6,000 of the 12,000 Alitalia employees go should it be successful in acquiring the Italian national carrier.

Will it happen?   Most likely not.

Though at first blush the LH offer is compelling and agrees to take on all of Altalia which is something that the Italians want to happen vs. Alitalia being blown up into bits and acquired by multiple suitors, it is expected that the group handling the administration of Alitalia will decline the bid.   That has been made obvious by the fact that a November 5, 2017 deadline set by Rome to find a suitor for Alitalia has been extended to April 30, 2018.   This extension does not inspire confidence that Lufthansa’s bid is being taken seriously.

I believe the proposal will fall on deaf ears in Rome since it suggests that 6000 Alitalia employees will lose their jobs, and with the Italian Gov’t in control of the sale such a deal would be bad politics considering that Italy itself is in a state of flux with its ruling parties and can ill afford to upset their constituency.  The proposal also suggests that short and medium haul routes would be gutted from the timetable.

Speaking of politics, there is no love loss whatsoever between Rome and Berlin thanks to the EU’s (primarily Germany) handling of most things on the continent.   The migrant crisis is front and center in Rome and Italy feels it is being asked (unfairly) to bear the burden of Merkel & Company’s failed experiment, but I digress.   So it would most likely pain Italy and Italians to see Germany of all countries (or an agent of it) come in to try and rescue Alitalia.   As the say goes, “thanks but no thanks”.   Italians are a prideful people and this just doesn’t seem like something they will sign off on.

In addition to the Lufthansa offer, EasyJet has also submitted a bid demonstrating its interest.  However their bid is asking for only parts of Alitalia and as I mentioned earlier, Rome wants this to be an ‘all or none’ deal.   There are also 3 to 4 private equity firms that have expressed interest in Alitalia but their details have not been made very obvious as yet.

While the process of finding a buyer continues, Rome has agreed to throw good money after bad and has announced that it has given Alitalia another 300mm Euro to continue operations.   This after the Italian government floated Alitalia a 600mm Euro loan earlier this year to help finance the debacle.   I’m sure that Italians are pleased that they’ve spent nearly 1 Billion Euro just this year alone to keep the birds in the air.

Apparently there’s no end in sight to this soap opera…..


a close-up of a plane

Air Berlin Files For Bankruptcy….What Does That Mean For Lufthansa?

Air Berlin Files For Bankruptcy….What Does That Mean For Lufthansa?

by | Aug 15, 2017 | Air Berlin, Etihad, Featured, Lufthansa | 1 comment

Earlier today, Air Berlin had done what most of us were expecting for some time when they filed for Bankruptcy protection.   The filing came primarily as a result of Etihad’s withdrawing of any more funding to help keep the airline viable.   Etihad had been a major stakeholder in ‘AB’ since January 2012.

The bankruptcy leaves Air Berlin in shambles as it is now left to scramble to either reorganize, sell off units, or simply cease operations.    As it stands now, the German government has stepped in with a €150 million bailout that will keep Air Berlin operational for 3 months.   During this time, ‘AB’ will be able to run as normal a schedule as possible, and ensure the employment of its 7,300 workers.   This is especially important since we are in the midst of holiday travel season in Europe.

During this period, Lufthansa will continue business as usual as it relates to the 38 aircraft that it sublet from Air Berlin earlier this year in an effort designed to help AB regroup their operation.

Over the next weeks and months, suitors will emerge hoping to take over important gate space at airports where Air Berlin operates.   Of course, with Berlin and Dusseldorf being the main hubs for AB, I suspected a heated bidding war to arise between the likes of Easyjet and Ryanair as they hope to make further inroads against Lufthansa on LH’s home turf.

Ryanair is already whining about LH having an unfair advantage due to all this happening in Germany, but Ryanair whines because it is what it does best when it doesn’t get its way.

Lufthansa has stated that it expects to compete successfully for the Air Berlin business due to its ‘home field’ advantage and its existing relationship with Air Berlin.  In fact, LH is already in talks with German and Air Berlin officials to craft a way forward that minimizes the impact of a complete shut down of Air Berlin.

Call it luck or brilliance, but Lufthansa appears to have played Air Berlin perfectly.    LH did not spend much time, money, or manpower to take on Air Berlin directly with their Eurowings unit.   Instead they saw the writing on the wall several months ago and waited patiently for their opportunity to arise.   Along the way, they offered help to support their fellow ‘countryman’, knowing full well that AB did not have a chance at survival and that Etihad would pull it’s life line from Air Berlin.   Now in the end, Eurowings is most likely to be the biggest benefactor and should see an exponential increase in size and presence in Europe’s Low Cost Carrier market.    Much to the chagrin of RyanAir, Easyjet, and others.


a close-up of a plane