EasyJet and Ryanair have both expressed interest in the Alitalia sale process – which could either mean that they are keen to have opportunistic peek at their ailing rival's books, or that they are genuinely considering bids for the Italian flag carrier.
Neither budget airline has yet given a clear indication of its intentions.
While she confirmed that EasyJet was "interested" in Alitalia, the UK low-cost carrier's chief executive Carolyn McCall told reporters in June: "We are not allowed to comment on the process at all. We have been asked by the government to not make any comment whatsoever about what is happening with Alitalia."
In confirming Ryanair's expression of interest, chief executive Michael O'Leary stressed that his airline was "a long way short of bidding" and, indeed, that "there would need to be a lot of changes to Alitalia before I think anyone would be interested in bidding for it".
But how might Ryanair benefit from a takeover, if one did transpire?
RYANAIR'S ITALIAN INCURSIONS
Data from Italian civil aviation authority ENAC shows that Ryanair is already the country's largest by passengers carried. The airline carried 32.6 million people in 2016, compared with Alitalia's 23.1 million. And the trend has been one of Ryanair advancing steadily in the short-haul market at the expense of its Italian rival.
FlightGlobal schedules data indicates that the budget carrier has a 22% share of all seats in Italy – factoring in both domestic and international routes.
With its entry to the Naples market this year, Ryanair now has bases in all of Italy's principal cities. In both Rome and Milan, it has operations at more than one airport.
Buying all or part of Alitalia could be a means of picking up valuable slots at the capital's Fiumicino hub and at Milan Linate, the northern city's business-friendly airport.
Alitalia's fleet would also be up for grabs; however, it is difficult to imagine this would be very attractive to Ryanair. Flight Fleets Analyzer shows that Alitalia has a fleet of 101 aircraft in service, the majority of them Airbus narrowbodies; Ryanair has an all-Boeing fleet.
Then there are Alitalia's widebodies – 14 A330s and 11 Boeing 777s – and the question of its long-haul business as a whole.
The received wisdom is that while Alitalia's short-haul network is haemorrhaging money, its long-haul operation is more lucrative and might be salvageable.
O'Leary has long talked about his interest in entering the long-haul business, but always says this would be undertaken by a separate company without Ryanair branding. Could a reformed, streamlined Alitalia long-haul unit fit the bill? Given the airline's narrow national focus, it seems unlikely.
Against the small number of potential pluses, there is a much longer list of negatives attached to buying the national carrier.
Restructuring of Alitalia would require major effort and funds. The airline is saddled with debt, is highly unionised, and has been slower to embrace the need for a low-cost unit than its European network rivals such as Air France-KLM and IAG.
It's a big task to take on as Etihad, and previous Alitalia strategic investor Air France-KLM, have both discovered. And as far as acquisitions are concerned, Ryanair has shown little appetite for such moves and, instead, generally positions itself to pounce on any airline failures.
Its purchase of UK low-cost unit Buzz in 2003 represents its only successful acquisition to date. That deal was strategic in nature, designed to give Ryanair greater market share at London Stansted and to boost its fleet.
O'Leary then trained his sights on a bigger prize: Aer Lingus. After purchasing a 16% stake in the Irish flag carrier in 2006 and upping that to 25% later the same year, Ryanair launched the first of several unsuccessful takeover bids. The first was rejected by Aer Lingus shareholders, and multiple future bids collapsed in the face of union and shareholder opposition as well as regulatory hurdles. Ryanair admitted defeat in 2015 and sold its shares to IAG, which helped clear the way for that airline group to acquire Aer Lingus.
Ryanair briefly circled Cyprus Airways in 2014, making a formal offer. O'Leary said his airline was on a shortlist of just two, along with Aegean Airlines, but ultimately Cyprus Airways collapsed in January 2015 before any details were shared on what Ryanair's offer for the struggling operator involved.
It would be easy for Ryanair to sit back and continue its current strategy of eating into Alitalia's market share. The indications are, however, that O'Leary wants to accelerate growth of his airline's presence in Italy, with or without a partnership.
O'Leary is among a growing cohort of airline chief executives who believe that as low-cost carriers continue to grow their market share in Europe they will inevitably need to interline with long-haul carriers.
Ryanair is already in advanced talks with Norwegian and Aer Lingus to seal a feeding agreement for long-haul flights, and O'Leary has suggested that other airlines have approached him to do a similar deal. That, Italian media reported in December 2016, included Alitalia. While no deal with Alitalia emerged, O'Leary remains focused on the potential of feeder services in Italy.
In May, Ryanair picked Fiumicino for its first experiment in connecting passengers by offering onward routes from the Italian gateway. This month it expanded the trial to Bergamo, one of its major bases.
It is possible that O'Leary is hoping that in its current perilous state, Alitalia can be convinced to agree a feeding arrangement with Ryanair, and that acquisition talks could facilitate this. Alternatively, he may be positioning Ryanair to take advantage of a full collapse of Alitalia, which would open up opportunities in Rome and elsewhere.
But another reason could be the one O'Leary has publicly highlighted: that the connecting trial is taking place in Italy because Ryanair wants to test it out before enacting an interline partnership with Norwegian, potentially at Fiumicino – where both carriers have bases, and from which the Scandinavian carrier plans to operate long-haul flights from November.
Whatever the case, it seems likely Ryanair would benefit more from a partnership with Alitalia than buying it outright.
EASYJET'S TOP-SPOT CHANCE
If the business case for a Ryanair takeover of Alitalia seems unconvincing, the same is probably true for EasyJet.
More access to Linate would be in line with EasyJet's strategy of operating to primary airports – and could give it space to grow beyond its Malpensa base.
EasyJet did have a base at Fiumicino but closed it in 2016, in the face of competition from budget rivals. Alitalia's slots might tempt the UK carrier – which still serves Fiumicino – to reopen a base at the capital city airport, but the competition now is if anything more intense, with Norwegian having opened a Roman station last year.
While EasyJet's Italian passenger numbers fell fractionally to 14.3 million in 2016, ENAC figures show, the carrier is still the country's third largest. Apart from Milan Malpensa, it has a large presence at airports such as Venice Marco Polo and Naples. And an acquisition of Alitalia would make EasyJet the largest carrier in Italy.
Alitalia's fleet of 72 A320-family aircraft might appeal to the UK carrier. Among the 72 jets are 12 A321s, which could be useful as EasyJet seeks to upgauge on constrained routes. However, Flight Fleets Analyzer shows the Alitalia fleet as a whole having an average age of more than 11 years, which might be too uneconomical for EasyJet. The UK carrier has large orders for the Neo.
The Italian carrier's widebody fleet would also appear to be unattractive for EasyJet given that, unlike Ryanair, McCall has completely ruled out any interest in going into long-haul markets. That stance, theoretically, could be revisited by McCall's successor – EasyJet having on 17 July confirmed that McCall is leaving to head UK broadcaster ITV. McCall, though, will remain in post until the end of the year, and given the urgency of Alitalia's search for investors, any decision will likely still be made on her watch.
Any thought Alitalia could be a vehicle for EasyJet to secure a European air operator's certificate to protect its European route rights, ended when the carrier announced plans earlier this month that it has opted to obtain an AOC and operating licence from Austrian regulators.
And while the Luton-based carrier finds unions more palatable than its Irish rival – which doesn't recognise them – the prospect of trying to unpick the labour challenges at Alitalia might seem daunting.
EasyJet has shown a greater enthusiasm for acquisitions than Ryanair, but mostly in its earlier years. In 1998, it purchased a 40% stake in Swiss operator TEA Basel to gain access to the non-EU country, rebranding it as EasyJet Switzerland. It also showed interest in Air Holland, French airline Air Liberte-AOM and German operator Deutsche BA – but in none of these cases did a deal emerge.
In those cases where EasyJet did show interest, early on, it was largely driven by a desire to build scale, particularly as the carrier strove to develop its presence outside of the UK.
EasyJet's largest airline acquisition was London Stansted-based carrier Go in 2002, enlarging its operations significantly. Go's brand and operations were subsequently merged into EasyJet, which later acquired Gatwick-based GB Airways – excluding its London Heathrow slots – in a move aimed at fast-tracking its growth at the south London airport.
That move for GB was made in 2007, and in the decade since there has been no acquisition activity involving EasyJet – though the airline was linked last year with potential interest in UK leisure operation Monarch Airlines.
Ultimately, low-cost carriers – both within Europe and globally – have little track record of acquiring network carriers of the size of Alitalia. Ryanair's move for Aer Lingus is the only comparable move in Europe – and the politics involved in O'Leary maximising pressure on its then state-owned rival offers a specific dimension to that case.
That too, potentially, applied in 2012 when Tony Fernandes' AirAsia embarked on a planned cross-ownership deal with national carrier Malaysia Airlines – a deal which was aborted within a year.
Brazilian carrier Gol did, however, acquire the successor to collapsed national carrier Varig in 2007. That move, particularly the acquisition of the Varig frequent-flyer programme, supported Gol's attempts to strengthen its position in business markets. But the related move into long-haul operations was to prove short-lived.
What might in the end put EasyJet and Ryanair off bidding for Alitalia is that both have demonstrated they can develop in new markets within the EU through their own activities – without any need to suffer the complications of growth by acquisition.
Source: Cirium Dashboard
