lettera dell'UE al governo italiano, testo integrale, scusate la lunghezza ma mi sembra interessante:
Brussels, 08/01/2021
COMP/E3/EMR/RB 2021/002606
Permanent Representation of Italy
Rue du Marteau 9,
1000 Brussels
Subject: State aid SA.58173
Dear Sir/Madam,
I refer to the business plan of the NewCo ITA (“the Business Plan”) sent to the European Commission
on 21 December 2020. As you know from preceding exchanges, the Commission needs to verify that
the creation of the NewCo satisfies two main tests:
- First, the Commission needs to establish whether the NewCo is in economic discontinuity
with Alitalia. This test is based on the criteria identified in the relevant precedents of the Court
of Justice (“faisceau d’indices”). Those criteria consist in the market price, the identity of the
shareholder(s) of the NewCo, the object of the sale (including the assets, staff and contracts
retained by the NewCo), the economic logic of the transaction and the time when the transfer
takes place. Questions under chapter A below are aimed at obtaining the relevant information
in this regard.
- Second, the investment planned into the NewCo needs to be market-conform. In other words,
a private investor operating in the normal conditions of a market economy should have made
the investment in question (the so-called “MEOP test”). Questions under chapter B below are
aimed at gathering the necessary information to verify that the investment of the Italian State
in the NewCo fulfils the MEOP test.
A. Economic Discontinuity
As discussed on several occasions in the past, the case team believes that the following would help to
ensure discontinuity in this case:
To ensure a market price, assets should in principle be sold by means of an open,
transparent, non-discriminatory and unconditional tender;
The NewCo should not retain the combined aviation, ground handling and
maintenance businesses. It should focus on the aviation business. The ground handling
and maintenance businesses should be sold separately to a third party;
A number of slots at congested airports should be given up;
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The Alitalia brand should not be retained by the NewCo, since it is an emblematic
indicator of continuity. Alitalia’s loyalty programme should not be simply transferred
to the NewCo. Also in this case, a tender is the preferred manner to ensure
discontinuity.
In light of the foregoing, please answer the following questions:
1. Market price
We understand that the acquisition of Alitalia’s assets by the NewCo will not be the result of an open
and transparent tender. Please indicate the detailed reason(s) of this choice.
2. Identity of the shareholders
Please explain the shareholders’ structure of ITA, its evolution throughout the 2020-2025 period and
compare it with Alitalia’s shareholder structure over the 2015-2020 period. Please explain whether a
different shareholding structure was envisaged for ITA and whether a private placement was also
envisaged.
3. Object of the sale
i. NewCo’s routes, comparison with Alitalia’s routes
According to the draft Business Plan (slides 28 to 31) ITA’s strategy would be: focusing on core longhaul
markets, maintaining the overall capacity while rationalising unprofitable domestic routes and
expanding on selected premium European markets. In light of the foregoing, please answer the
following questions:
A. How will ITA organize its strategy of focusing on routes with a positive contribution to the
network? How will it identify the routes in question, in particular domestic, where there is a
strong competition with low-cost carriers? Did ITA carry out a preliminary market analysis of
competition on domestic routes?
B. Please explain how this strategy differs from the normal season to season route selection that
Alitalia was performing between 2015 and 2020.
C. Please indicate in detail which are the long-haul routes on which ITA will focus its operations
and which are the long-haul routes already covered by Alitalia which ITA will not take up.
Please indicate which are the key strategic routes to be launched in 2021. Please also justify
the sources, calculations and anticipations of the demand for long-haul flights, on which ITA
will base its industrial strategy.
D. Please provide an (Excel) route by route profitability analysis which indicates all the routes
that Alitalia served in the period 2015-2020 (by years) with information on passengers,
number of flights, variable costs, fixed costs and overall profitability. Please also provide your
estimates on the expected profitability of each route for ITA (on the same disaggregated basis)
and reconcile the profitability of Alitalia in the period 2015-2020 and the expected
profitability of ITA for 2021-2025.
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E. Please indicate in detail which are the domestic and European routes, already covered by
Alitalia in 2015-2020, which are not going to be covered by ITA’s operations and the reasons
for these choices (profitability, strategy, etc.). Please explain in detail the reasons why,
according to the draft Business Plan (slide 31), a partnership with a European player from
2022 is crucial for ITA’s growth in the medium haul European market. Please also justify the
sources, calculations and anticipations of the demand for domestic and European flights, on
which ITA will base its industrial strategy.
F. Please provide evidence from internal documents of Alitalia on what would be the expected
routes that it would be operating in 2021.
ii. ITA’s transport capacity
As mentioned above, one of the parameters to assess lack of economic continuity is that of a reduced
perimeter of operations by comparison to Alitalia. As an indicator, the transport capacity of the present
Alitalia was reduced to 69% (in terms of passengers/ km) of the old Alitalia in the 2008 Alitalia
discontinuity decision.
A. In this regard, please indicate in detail if and how a comparable reduction of transport capacity
will be achieved between Alitalia and ITA, making specific reference to ITA’s forecasts of
transport capacity from 2021 to 2025 as described in the draft Business Plan. Please explain in
detail how ITA will achieve the planned growth, focusing on how the relevant factors of
production (workforce, slots, airplanes, etc.) not taken up in 2021 will be acquired.
B. Please provide internal documents of Alitalia which indicate the level of activity the company
was expected to achieve in 2021 and 2022 without new capital injections. Please contrast these
estimates with ITA’s forecasts.
C. We understand from the draft Business Plan (slide 41), that part of the old Alitalia fleet will be
leased to ITA. Please provide details and justification of the price of the lease agreements and
why this would be a market price (the draft Business Plan mentions “best market conditions”).
Please indicate whether and for how many aircrafts will ITA replace Alitalia in existing lease
agreements with third-party providers. In all cases, please describe the conditions applied to
the leases. In case of renegotiation of leases, please explain to what extent such renegotiation
took place in anticipation of starting of operations by ITA or as part of the normal business of
Alitalia, similar to other airlines in the current COVID context.
D. Has ITA already entered into discussions with aircraft manufacturers on the pricing of new
aircrafts? How does this pricing and terms compare to what other companies have been able to
secure?
iii. ITA’s hubs strategy and surrender of slots at congested hubs
A. We understand that Alitalia has accumulated consistent losses and steadily lost market shares,
in particular because of the exploitation of three competing hubs (Fiumicino and Malpensa for
long-haul, Linate for short/medium haul). We also understand from the draft Business Plan
that ITA’s strategy is to maintain a multi-hub strategy keeping its hubs in Fiumicino and
Linate (using the second one mainly for intra-European traffic). Please explain in detail the
rationale underlying this strategy, providing any supporting evidence of its discontinuity with
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the previous multi-hub approach by making reference to the traffic and the proportion of the
revenues generated in each of the three airports in 2015-2020 in the case of Alitalia and the
projections for ITA for the period 2021-2025.
B. As mentioned above, one of the indicators of economic discontinuity is the surrender of a
meaningful number of slots at congested airports. The draft Business Plan indicates
maintaining control over Linate and Fiumicino’s slots as one of the central elements of ITA’s
overall strategy. More in general, the draft Business Plan does not indicate whether and to
what extent ITA intends to give up slots at congested airports. In light of the foregoing, please
answer the following questions:
For each of the two airports of Rome Fiumicino and Milan Linate, and for each of the
summer 2019 IATA Season and winter 2019/2020 IATA Season, please provide a
table including:
o the total number of slots requested by all carriers by the Initial Submission
Deadline as set in the IATA Calendar of Coordination Activities;
o the total number of slots allocated to all carriers and the total number of slots
available ;
o a list of all carriers having requested slots and, for each of these carriers,
please provide:
the total number of slots requested by the initial submission deadline,
and
the total number of slots allocated to the carrier.
What are Alitalia’s slots that ITA will not use at the start of its operations in 2021?
Please indicate how many of the mentioned slots are situated at congested hubs (e.g.
Charles de Gaulle, Heathrow, Frankfurt, Madrid Barajas, etc.). Please also indicate
how many among the mentioned slots will be given up and how many will be put on
hold in view of their usage at a later stage.
How many of Alitalia’s slots at Linate and Fiumicino will be taken up by ITA in 2021
and how many will be subsequently taken up between 2021 and 2025? Please explain
what will be the status of the slots not used at the start of operations in 2021 in these
two airports.
Please explain the degree of congestion in Linate and Fiumicino.
iv. ITA’s staff
A. We understand from the draft Business Plan that ITA will start in 2021 with 5 200 – 5 500
FTEs. We understand that this staff comes from the current Alitalia. Please confirm. Please
explain on which basis, under which type of agreement and at which conditions will Alitalia’s
staff taken up by ITA in 2021 be hired. Please explain in particular whether ITA will take over
existing staff contracts and at what conditions. Please also indicate what will happen to
Alitalia’s employees that will not be taken up by ITA in 2021, specifying in particular whether
they will be made redundant or not. Please also provide information on the number of Alitalia
staff that effectively worked in the period after March 2020 on a per month basis.
B. We understand from slide 51 of the draft Business Plan that the number of ITA employees will
reach levels comparable to those of Alitalia already in 2023 (8700/9100 employees). Please
indicate on the basis of what elements and what processes the decision to increase the
workforce will be taken. Please provide a detailed description of the selection processes
specifying whether and under which conditions ITA will have any contractual or legal
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obligations to hire preferentially ex Alitalia employees. Please indicate what will be the
contractual and economic conditions applied to new hires and whether and to what extent they
will differ from those applied to former Alitalia employees taken up in 2021.
C. Please provide a detailed description of how ITA’s staff will be distributed among the
different activities planned (aviation, ground handling, maintenance). Please also indicate
what are the contractual and/or economic conditions applied to each category of employees
(types of contracts, flexibility in hiring and dismissing).
D. Staff productivity: At slide 42 of the draft Business Plan you indicate that in 2025 ITA’s
CASK will be lower than that of FSCs in 2019 and slightly higher than that of LCCs (always
in 2019). Can you please explain how the CASK of FSCs is expected to develop until 2025?
At slides 50 and 51, you envisage a productivity alignment to market benchmarks (750 BH /
year) through planning levers. Nevertheless slide 50 shows that the “target” productivity will
be 6/7% lower than that of other FSCs, the main gap regarding pilots and captains employed
for long haul flights. Are these benchmark levels based on 2019, 2025, or other figures?
E. In light of the foregoing, please explain in detail what are the elements and the variables on
which the achievement of the “target” productivity will depend. Please also explain why the
“target” productivity is not in line or better than that of other FSCs. Please provide values for
the envisaged productivity on a YoY basis from 2021 to 2025 and a comparison with the
productivity levels of Alitalia in 2019 and 2020.
v. ITA’s perimeter of activities
A. As mentioned above, in order to guarantee economic discontinuity with Alitalia, it is
important that ITA’s perimeter of activities is different from that of Alitalia. Discontinuity
would be easier to find, should ITA focus on the aviation business while giving up the ground
handling and maintenance businesses. In light of the foregoing, please confirm whether ITA
intends to maintain ground handling and/or maintenance within its perimeter of activities.
Please also indicate what the strategic and economic rationale of this decision would be.
B. As regards ground handling, we understand from the draft Business Plan that ITA intends to
insource both above the wing and below the wing activities at Fiumicino airport while
outsourcing at all other stations. Please confirm that this is the case. Please explain whether
handling at Linate will be managed as in all other outstations. Please explain the reason for
applying this approach and not a different one (e.g. Lufthansa’s, which outsources below the
wing activities). Please provide up-to-date indicators of the viability of the handling business
for ITA, including detailed benchmarks with the main FSCs and LCCs. Please explain, in light
of these elements, the rationale of maintaining handling within ITA’s perimeter of activities at
Fiumicino airport while outsourcing it in other airports. Please explain whether the ground
handing activities are only for ITA (captive sales) or whether ground handling services will be
offered to competing airlines. Please explain what are the complementarities that are expected
to materialise if ground handling activities are to be maintained in Fiumicino airport.
C. As regards maintenance, we understand from the draft Business Plan (slide 47), that ITA
envisages to entrust maintenance to an ad-hoc created company fully controlled by ITA. This
company will provide ITA with maintenance services at market prices. Please indicate the
economic and strategic rationale for not acquiring maintenance services on the market from
third-party providers.
D. Please explain the complementarities, which are expected to materialise if maintenance
activities are to be maintained.
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E. Please provide separate financial statements regarding Alitalia’s aviation, hub-handling and
hub-maintenance activities in 2015-2020. Please also provide an estimate of the same
statements for ITA’s operations from 2021 to 2025.
F. Please specify the capital that would be allocated to each of the activities for ITA.
vi. Brand
Please provide an estimate of the value of the brand of Alitalia and provide support for this
valuation. Please also explain whether ITA plans to acquire the brand at market price, and
whether that market price would result from a tender.
vii. Other Alitalia’s assets and liabilities
More in general, the draft Business Plan does not mention which assets and liabilities would be
acquired by ITA from Alitalia. Please provide a detailed list of all the assets and liabilities that
are taken over from Alitalia and explain how large those assets and liabilities are compared to
the total balance sheet of Alitalia. Please also indicate the value those assets and liabilities and
how it has been determined, i.e. whether they have been valued on a piecemeal or going
concern basis as well as which valuation method has been used.
viii. Contracts
Paragraph 4ter of art.79 of the Decree-Law Rilancio provides that ITA will substitute Alitalia in
the current existing public air services contracts concluded with the State in order to guarantee
the territorial continuity. Does the objective of territorial continuity play a role in the creation of
ITA? Please explain which PSOs will be ensured by ITA and whether tenders will be run to
ensure the regularity of these PSOs.
ix. Loyalty programme
Please explain whether the old Alitalia loyalty programme will be discontinued and whether
passengers will start accumulating only new miles.
4. Economic Logic of the transaction
Please explain in detail the economic logic of the transaction from the point of view of ITA’s
shareholder(s).
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5. Time of the transaction
Please indicate precisely the moment at which the creation of ITA has been decided. Please also
indicate the moment at which the transfer of assets from Alitalia to ITA has been decided and
will be carried out. Please specify how the two mentioned moments can be positioned with
regard to the ongoing Commission’s procedures for illegal and incompatible State Aid
regarding loans from Italy to Alitalia.1
B. MEOP assessment
A. The investment (equity injection) planned by Italy in ITA may raise State aid concerns as it is
unclear whether it will be market conform. Please provide the Commission with an MEO or
pari passu assessment on the basis of the draft Business Plan submitted.
B. Please explain the economic rationale behind the decision to create a new airline company in
the light of the current economic context affected by the coronavirus, which has particularly
hit the aviation sector. Please explain how the existing uncertainty and risk are reflected in the
draft Business Plan and the financial profitability of the project.
C. Please provide details on the planned return on investment (ROI) for the Italian State in the
capital structure envisaged in the draft Business Plan. Please provide adequate benchmarks
and rationale demonstrating why the mentioned ROI would be acceptable for an investor
operating under normal market conditions.
D. Please clarify what would be the types of capital that the Italian State will provide to the newly
established company separately for equity and for new debt (e.g. elaborate on what you
provide in slide 87). In particular, for new debt, please explain the terms and characteristics of
the debt instruments.
E. Please explain the main assumptions underlying the data provided in slide 84, in particular the
term loans and the revolving credit facility: please specify the terms of the debt funding and
the estimated cost of the debt. You mention for example mortgage term loans. Why do you
think mortgage term loans are the relevant comparator?
F. Please explain what are the required rates of return for the new debt that underpin the MEO
assessment. Please explain in terms of the characteristics of the instrument(s).
G. Please explain what are the required rates of return for the equity injection that underpin the
MEO assessment. Please explain in terms of the characteristics of the instrument(s).
H. Please specify whether ITA will also secure financing from private sources. Please explain if
concrete proposals have already been drafted by financial partners, which ones and at which
conditions. Did the Italian authorities test the appetite of market operators for such financial
operation?
1 Cases SA48171 and SA55678. (questa e' una nota a pie' di pagina, ndr)
Impact of economic discontinuity parameters on ITA’s viability
We understand from the draft Business Plan and oral exchanges with the Italian authorities
that ITA would like to maintain Alitalia’s brand and loyalty programme as well as the hubhandling
and hub-maintenance activities. We also understand that maintaining Alitalia’s
position at Linate’s airport is key in the overall strategy underlying the draft Business Plan. As
mentioned above all of these elements are of particular importance in the assessment of
whether or not ITA will be in economic (dis)continuity with Alitalia. In light of the foregoing,
please indicate:
A. What percentage of Alitalia’s slots at Linate, Fiumicino or other congested airports does ITA
plan to give up without endangering the stability of its Business Plan? Please provide a
detailed list of the slots.
B. What would be the impact on the draft Business Plan of a decision not to be active in handling
and maintenance?
C. What would be the impact on the draft Business Plan stability of a decision not to acquire
Alitalia’s brand and loyalty programme?
D. In case you indicate that any of the mentioned measures is likely to negatively impact ITA’s
draft business plan, please provide a detailed description of the underlying reasons. Please also
explain the reasons why the mentioned impact cannot be avoided.
Financials and profitability
A. Please provide projections of ITA’s detailed balance sheet statement, profit and loss statement
and cash flow statement for 2021-2025 in Excel format with visible formulas. Please provide
the statements in a way that the financial statements are split by activity (ground handling and
maintenance should therefore be visible separately).
B. Please also provide longer-term estimates which would allow you to compute the net present
value of the capital injection and provide justification for these longer term projections by
making reference to benchmarks and market analyses.
C. With regard to the profit and loss statement of ITA, please provide the revenue projections for
2021-2025 in Excel format and justify their level and growth rates based on underlying
forecasts from market/industry reports (e.g. IATA) and/or peer companies.
D. With regard to the balance sheet statement of ITA:
a. Please provide a breakdown of the projections of ITA’s main asset categories, i.e.
owned fleet, leased fleet, cash and liquidity, account receivables, inventories, deposits
and all other items you deem relevant.
b. Please provide a breakdown of the projections of ITA’s main liabilities categories, i.e.
equity, financial debt, leasing liabilities, account payables, advance payments on
tickets, provisions and all other items you deem relevant.
c. Please provide the capital plan (incl. equity issuance/repayment, debt
issuance/repayment and capex) of ITA.
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d. Please explain ITA’s capital structure at the launch of the company and its evolution
on the 2021-2025 period.
E. Please provide ITA’s cost of equity (or cost of capital, if more appropriate) together with the
details of the parameters for its calculation and their explanation. That explanation must
include, inter alia, the sources of the risk-free rate (e.g. Italian government bond, 10-year
maturity), equity risk premium and cost of debt, as well as the list of peers, together with their
relevant parameters, that you used to calculate the beta coefficient.
F. Please provide all the financial statements for the 2021-2025 period in the sensitivity scenario
but also for the longer term estimates in an Excel format. Please also compute the net present
value of the investment under the assumptions of the sensitivity scenario. Please explain all
the assumptions that underlie the sensitivity scenario. Please also comment on the likelihood
of such a scenario materialising.
G. Please explain in particular what is intended at slide 88 under “Need to finance the funding
gap through additional total equity injection up to c. €2.1bn, without considering any further
potential disbursements for the purchase with cash or debt assumption of the assets and/or
company branches of AZ in AS”: what would be the impact of these further potential
disbursements? Please explain also how these adverse scenarios are reflected as part of the
MEO assessment.
H. Slide 88: please explain whether you took into consideration the initial investment of EUR 20
million in the financial projections of the draft Business Plan and how (see footnote 1 in the
slide).
I. Does the sensitivity case mentioned at slide 88 correspond to the worst-case scenario
mentioned at slides 80 and 81?
Yours sincerely,