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Italy’s Latest Plan for Alitalia Aims to Get Lufthansa On Board

Italy’s Latest Plan for Alitalia Aims to Get Lufthansa On Board

(Bloomberg) --

Italy’s newest attempt to rescue failed airline Alitalia has one main objective: rope in German carrier Deutsche Lufthansa AG.

The government last week tasked Alitalia’s new management team with drawing up a business plan that will satisfy Lufthansa’s demand for restructuring at the money-losing airline in exchange for a role in running it, people familiar with the matter said.

In a Nov. 19 letter to the government, Lufthansa made a series of requests including shrinking Alitalia’s fleet by about 30%, said the people, who asked not to be named discussing sensitive deliberations.

In the letter Lufthansa said it would possibly be open to an equity investment of as much as 160 million euros ($177 million). It would also be prepared to pay Alitalia as much as 50 million euros for its decline in revenue in moving from the Sky Team group to Star Alliance, the people said.

The German carrier’s interest is conditional on Alitalia’s profitability, according to the people.

Restructured Alitalia

“We have always said that we are interested in a restructured Alitalia,” a spokesman for Lufthansa said. “We could also imagine conventional partnerships with Alitalia.”

In addition to the alliance shift, Alitalia’s new administrator Giuseppe Leogrande is preparing for job cuts, daily la Repubblica reported over the weekend.

While the Lufthansa letter didn’t mention redundancies, it did discuss the possible sale of Alitalia’s baggage-handling unit and plans for cost savings at its maintenance division, the people said.

Economic Development Minister Stefano Patuanelli, responding to reports of a possible break-up of the carrier’s units, said last month that Alitalia “must stay together,” Ansa news agency reported.

Representatives for Alitalia declined to comment. The Italian Finance Ministry also declined to comment.

Italy earlier this month approved a new 400 million-euro loan to keep Alitalia flying as it scrambles to find investors interested in helping relaunch the carrier.

State rail operator Ferrovie dello Stato Italiane SpA and infrastructure giant Atlantia SpA said in November that it was not possible to come up with a viable investment strategy for the airline, though Atlantia subsequently said it’s still open to discussing a plan for the company’s turnaround.

Alitalia has been managed by state-appointed administrators since 2017 and is burning through a previous 900 million-euro state loan.

To contact the reporters on this story: Alberto Brambilla in Rome at abrambilla8@bloomberg.net;Daniele Lepido in Milan at dlepido1@bloomberg.net;William Wilkes in Frankfurt at wwilkes1@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Jerrold Colten, Tommaso Ebhardt

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