Resurgent Alitalia is expected to receive €200m ($236m) in state aid owing to the pandemic. Yesterday, the EU Commission found the request for assistance to be in line with European Union regulation. The funding will be used exclusively to cover COVID-19 damages.
Alitalia granted state aid
The EU Commission has been inundated with requests to grant state aid for carriers across Europe. Very few of those carriers were affected as severely and quickly as Italian airlines who bore the brunt of a steep spike in COVID-19 cases.
After canceling hundreds of services as Italy went into tight lockdown, Alitalia has seen its income plummet. However, on the back of this challenging situation, the airline has now been granted a lifeline. The EU Commission approved a grant of nearly €200m ($236m) yesterday on September 4th.
The €199.45m in aid corresponds directly with Alitalia’s losses from March 1st to June 15th when the pandemic was at its worst in Europe. At this time, the Italian carrier, like so many others, was powerless to operate and secure income. It’s a situation that the EU Commission has termed an “exceptional occurrence.”
The news means that the Italian government will now be legally authorized to support Alitalia.
The aid is only for damages
Despite the generous approval, the EU Commission has been quick to reiterate that the money should only be used to repay damages incurred by the airline as a result of the coronavirus.
In a statement from its website, the European Commission said,
“The Commission found that the Italian measure will compensate the damage suffered by Alitalia that is directly linked to the coronavirus outbreak. It also found that the measure is proportionate, as the compensation does not exceed what is necessary to make good the damage.”
It is clear that the EU Commission wants to douse any suspicious that Alitalia is receiving more money than it deserves. The airline is still subject to investigation after receiving to state-backed loans thought to be recalcitrant with EU regulation. In April 2017, Alitalia received €900m ($1bn) from its government and went on to receive a further €400m ($473m) loan two years later in October 2019.
How will Alitalia use its aid?
Alitalia has not issued a comment on how the new aid will be spent. However, with this support alongside reports that the Italian government is willing to inject €3bn into the airline, there are clear opportunities for Alitalia to grow.
For one, it will look at renewing its fleet. Alitalia has around 95 aircraft, many of which are aging and cost Alitalia a lot in maintenance. With new aircraft, or at a minimum, a few updates, the airline could then look to branch into new markets.
With no internal competition in Italy, theoretically, Alitalia has a good customer market. However, it is challenged by international carriers that flock to its homeland. If Alitalia can conjure a good network strategy while demand for air travel is low, it can grow as passengers return to the sky.
How do you think the government should invest in Alitalia? Where will it see the best growth potential? Let us know your thoughts in the comments.
