Certares plan: Fiumicino hub for the great south of the world

Written by Mario Masciullo - eTN Italy

This is one pillar of the industrial plan that private equity firm Certares is developing for ITA Airways.

The month of October is decisive for the successful outcome of the negotiations between the US fund and the Italian Ministry of Economy and Finance for the acquisition of 50% plus one share of the Italian flag air carrier.

According to reports from Il Corriere della Sera, (Italian daily) the entry of Delta Air Lines with an investment of 80-100 million euros for 10-15% of ITA could be workable while the focus on markets – besides North America – envisages a leading role on connections from Rome to Latin America and Africa “where some destinations would allow profitable flights to be made quickly, without waiting 2-3 years which usually serve as a running-in.”

Finally, particular attention would be paid to costs, especially regarding fuel and aircraft rental; as already reported in the last few days.

The top management of Certares shared the guidelines of the industrial plan with Aeroporti di Roma: in the meantime, next week – probably on October 11 – the US fund should meet the Italian trade unions, therefore, the National Agency for civil aviation (ENAC) and the Transport Authority.

The Mef – Italian Ministry of Economy and Finance – has extended the schedule for negotiations with the consortium formed by the US fund Certares, Delta Airlines, and Air France-KLM for the privatization of ITA Airways.

Giorgia Meloni, the new chairman of the board, will decide on the negotiation with Certares which should lead to “the signing of binding agreements only in the presence of content that is fully satisfactory for the public shareholder” underlined the Ministry of Economy in a note.

According to reports from La Repubblica, however, ITA’s accounts are under close observation and two items are worrying future buyers: the cost of fuel and the rental of aircraft.

However, the parties have until October 31 to study the dossier thoroughly and reach an agreement.

There are some movements of Delta Air Lines, however, that already seem to direct the US carrier towards a plan to support the growth of ITA and which concern both fuel and new planes.

To cope with the rising fuel prices, ITA has anchored itself to the offer of Delta Air Lines, owner of a refinery in Delaware, thus obviating the use of hedging and paying Delta lower prices for its supplies.

It is still Delta Airlines to raise the fate of ITA’s purchase and rental of aircraft from Airbus and brokers with an outlay of over 500 million euros. Delta’s support includes two conditions: the acceptance of aircraft from Delta’s fleet by ITA and that aid package, fuel and aircraft, will be activated only when there is at least the signing of all parties on the preliminary sales agreement in order to lower costs and ensure connectivity.

According to the latest rumors, Certares should not present its industrial plan for ITA, but will work on improving the plan already presented by the top management of ITA at the beginning of 2022.

In any case, the probable buyers would like to insert an additional payment of 600 million euro, presumably between 2023 and 2024, bringing the capitalization of ITA to a total of 1.95 billion between public and private liquidity. With a possible final sale agreement, then, the ITA board will be made up of five members: president, CEO and three directors. Of these three members would be nominated by Certares and two by the Italian government.

Regarding the ITA fleet, Certares plans to bring it from the current 67 aircraft to 80 in 2023 – the first year of the new plan – to reach 98-100 in 2024 and 120 in 2025.

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