Alitalia is out of cash (again) and Lufthansa stepping up to offer 200 million euros ($223MN). Since when is Lufthansa in the business of losing money?
While Lufthansa has officially said, “We are not commenting on this,” numerous reports have appeared in Italian newspapers this week about Lufthansa’s latest Alitalia investment offer. Reuters coaxed a Lufthansa insider to confirm the proposal off the record.
Ferrovie dello Stato, Italy’s state-run rail company, is leading efforts to find investors to keep the lights on at troubled Alitalia. Lufthansa sent a letter to Ferrovie dello Stato saying it is open to investing in Alitalia, but still questions Alitalia’s priorities.
The two will meet in Germany next week, with Lufthansa reportedly prepared to offer between 150 and 200 million euros.
Delta is also in the hunt, having privately floated the idea of a $100MN rescue package. The Atlanta-based airline takes a “subsidies for me, but not for thee” approach to doing business and would love nothing more than to use its money in concert with the Italian government to squeeze out Air Italy.
Lufthansa Should Know Better
Lufthansa learned a lot from its failed Lufthansa Italia venture from 2009 – 2011. It learned of the perils of the Italian market and how it is tough to compete against a flag carrier the state is always willing to bail out.
In that sense, Lufthansa is not totally foolish to take the “if you can’t beat them, join them” approach. But Alitalia has proved resistance to change over and over again. What makes Lufthansa think its money won’t be quickly digested and Alitalia will still be very hungry? Surely Lufthansa can avoid some of the mistakes that Etihad made, but Etihad provides a rich case study in the inability to change much of anything at an airline set in its ways.
With Delta and Lufthansa potentially entering a bidding war, Lufthansa must guard itself from offering too many concessions. Alitalia does not need concessions: it needs order and discipline.
> Read More: Will US Airlines Now Boycott Alitalia?
> Read More: Dense, Dimwitted Logic From A Deliberately Deceptive Delta CEO
Alitalia is poorly run. Unless it is truly deemed a public utility over profit-maker, it needs a partner like Delta or Lufthansa (who itself isn’t without issue) to right the ship. But Lufthansa must resist clever words and promises of reform. Unless it wants to throw money away, it must not only pre-negotiate reforms, but win labor backing for them. 200 million euros is far too much just to keep competitors away.