The future of ITA Airways could soon be decided. Participants in the tender for the takeover of the state-owned flag carrier, created in 2021 as the successor to Alitalia, submitted their final bids earlier this week. Yesterday, advisers to the Ministry of Economy and Finance of Italy, the company’s sole shareholder, were able to hear the proposals.
The previous round had not been completed, after the Italian government considered the bids to be below its expectations. According to Corriere della Sera, a first briefing on the progress of the privatisation process was scheduled for today at Palazzo Chigi, the seat of the national administration.
Competing for the major participation in the company are the consortium of Lufthansa and cruises company MSC, and the American investment fund Certares, which specialises in investments in the travel and hospitality sectors.
On July 5th, when the first bids were submitted, Lufthansa and MSC had estimated the price of the Italian airline at between 800 and 850 million euros. Certares, for its part, estimated a price of between 550 and 600 million. Already since then, the government has expressed its intention to raise these sums. Nevertheless, this is not an easy target due to the downward price trend projected for the near future, according to experts.
According to ministerial sources explained to Corriere della Sera, there is now an economic difference of 210 million euros between the latest proposals of both, depending on their different proposals. The two bidders attribute an enterprise value of around 950 million euros to ITA Airways. However, according to the privatisation decree, the Italian State will continue to be a shareholder of the company. As a consequence, a chapter of discussion on the participation of each actor was opened.
In the first case, MSC would take 60% of the airline, Lufthansa another 20%, and Italy the remaining 20%. Certares, on the other hand, said it was willing to reduce its stake to 55% or 57% and leave the other part to the State. According to sources consulted by the Italian newspaper, the first of the offers would be a privatisation, while the second would mean a co-management.
The latter aspect is confirmed by the fact that the American fund would allow the ministry to choose the President of the company. However, it is not clear whether in an executive or representative capacity, while all powers would be vested in the airline’s CEO. In such a circumstance, the ministry would also be part of strategic decisions.
For their part, Lufthansa and MSC stressed their unwillingness to give up their position on aspects of entrepreneurial freedom. In that sense, they assured that their plan, which they judge as «ambitious», can only work under an «apolitical» management. The conditions for the sale of the majority stake require three key aspects: the guarantee of jobs, an increase in the fleet and an increase in the flight network.
Now, the novelty is the 20% premium of the Ministry of Economy and Finance that would be recognised to the State at the time of the public divestment if better economic results than those stated in the business plan are achieved. At that point, it is estimated that the public coffers would get around 100 million euros more from the management of Lufthansa and MSC. The economic differential between the two groups’ bids would then amount to 310 million.
In any case, Prime Minister Mario Draghi is expected to give the green light to the sale of ITA Airways in the near future. In doing so, he would be fulfilling his commitment to the European Union. «It is not my intention to leave this decision to the next government», he said. Lufthansa and MSC want to make progress on the deal before the general election of next September 25th.
The candidate of the nationalist Brothers of Italy party (Fratelli d’Italia) is leading in the polls and has already expressed reservations about privatising the flag carrier. Recently, the party even asked the current administration to «freeze» the sale of the majority stake. If the deal is broken before December, Italy will have to pay a penalty of between 42.5 and 85 million euros.
