Italian Railways to buy AlItalia?

 

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Italy’s government, while admitting there were other bids for the airline, which declared bankruptcy in May 2017 and has been in a state of effective administration ever since, said yesterday that the state owned national railways Ferrovie della Stato, is to make a bid for Alitalia.

FS said that it was keen to buy the company and create a unified transport system in the country. At the same time the motivations from FS are to “re-launch” rather than “save” the airline, which sounds mildly ominous, but seems to be no different to the intentions of the other bidders.

The purchase by a state owned entity however loosely controlled by the government, has significant repercussions for Italy’s budget and deficit, already a major area contested with the EU and the European Central Bank as Italy is in the Euro.

Furthermore, the Italian government has subsidised AlItalia through loans from other parts of the governments owned agencies, including the state pensions fund and the Italian Post office.

These loans must be repaid, under EU law that Italy has signed up to, or be seen as illegal state aid which has severe consequences for the airline, but is likely to put the Right-Left coalition government on a collision course with its EU obligations, something it seems to want to take on.

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