The use of the group’s commercial infrastructure to sell more and better, access to a single purchasing center to obtain savings and entry as a first-level member in the transatlantic joint venture, no longer in the background as suggested by rivals . Lufthansa’s proposal to Italia Trasporti Aereo – the public newco created to relaunch Alitalia – rests on these three major pillars and is able to generate around 200 million euros in economic benefits per year, according to what they tell the Corriere della Sera three ministerial and industrial sources.
It would also be the first formal step to allow Lufthansa (which as a group also includes Swiss, Austrian Airlines, Eurowings and Brussels Airlines) to enter the capital of the Italian airline at a later date. When that is, the restrictions imposed by the EU will be lifted – in exchange for public aid to overcome Covid – but only under certain conditions. Strict conditions – explain the sources -: if the commercial operation does not bear the hoped-for results and if precise guarantees do not arrive from the Italian front, then the entry into the capital of ITA will not take place.
The two proposals
At present – according to what the Courier service – the Italian newco has not yet taken a decision on international alliances. There are two proposals on the table. On the one hand, that of Delta Air Lines – historical partner of Alitalia – which avails itself of the European support of Air France-KLM and Virgin Atlantic. On the other hand, that of the Lufthansa group, which on the intercontinental market relies on the transatlantic joint venture with United Airlines and Air Canada, while in Italy it has been present for some time with its Air Dolomiti division which has been certified as an Italian airline operator.
The trade agreement
The Germans are convinced that there are evident synergies between the countries of the Lufthansa group (Germany, Switzerland, Austria, Belgium) and Italy. This is why the commercial partnership would be an excellent starting point. The proposal made to ITA provides access to the infrastructure of the European giant – which is among the most advanced in the world – not only to sell tickets, but also to optimize costs by operating through a single purchasing center, among other things, of spare parts, obtaining greater discounts. ITA could then participate in the internal projects of the Lufthansa group ranging from operations for increasing revenues to reducing the consumption of kerosene in flights.
The intercontinental front
Cost containment, according to insiders, is the first challenge in this period that will slowly lead to pre-Covid levels. Until 2023-2024 carriers do not expect to make profits on intercontinental routes – business traffic is still at a minimum and flows with America and Asia are reduced due to restrictions – so it becomes vital to reduce losses: if revenues have collapsed, operational expenses remain. However, in the Lufthansa package there is the entry of ITA into the transatlantic joint venture with United Airlines and Air Canada as the main partner, not the second level (which Delta proposes) with the aim of growing without a limit in terms of routes and revenues.
Lufthansa’s proposal for not free from insidious aspects. According to the Germans – the sources continue – ITA would start too small with a fleet of 50-52 aircraft to be able to create that minimum critical mass on the Rome Fiumicino hub. But at the same time the coronavirus does not allow to take off already large – which the unions are asking – because the airline would end out of the market immediately. The following year, however, the newco expects to reach about 80 aircraft. The Germans, then, are not clear about the financial endowment of ITA: will it use all the 3 billion euros allocated by the Conte government (and confirmed by the Draghi executive) or will it limit itself to the 1.35 billion announced in Brussels? Only by solving these unknowns and faced with a positive economic trend for 2-3 years can Lufthansa think about joining the shareholder structure.
Lufthansa’s interest in Italy Air Transport (and Alitalia) explained by the numbers of specialized databases. In 2019 – before the outbreak of the pandemic – the company transported 7.9 million passengers between the US / Canada and its hubs in Frankfurt and Munich, filling the planes by an average of 92%. But eight out of ten intercontinental travelers only made a stopover in Germany, continuing to other destinations or arriving from elsewhere to the two airport hubs. Italy is the main basin, not only for tourism reasons, but also for a significant business segment. Not only that: the San Francisco-Rome route is also among those with the highest demand, not surprisingly a connection that Alitalia intended to operate from summer 2020.