Will Msc really fly Ita?
Why is MSC aiming for Ita with Lufthansa? Facts, numbers, scenarios and doubts. The analysis of Ugo Arrigo, transport economist
Two twists and turns in a few days involved ITA, the new public airline that has been flying since last October and which hadn't been talked about much since take-off. The first was the revelation by President Altavilla of the economic results of the first months of the flight, made in two stages on the occasion of a double hearing at the Transport Committee of the Chamber. We thus learned that ITA loses much more money than the old Alitalia in proportion to its size and, even if we did not doubt that this would happen, to know so soon, just three months after its debut, was a real surprise.
The second twist is the announcement by ITA of the expression of interest in the purchase of the majority of the shares by the MSC maritime group, controlled by the Aponte family, known to the general public for its cruise ships. The expression of interest would have taken place in agreement with the Lufthansa group, which would enter the consortium as an industrial partner. The project envisages that the Italian government will maintain a minority stake within the company. According to the ITA press release, which will evaluate the details of the expression of interest at a forthcoming meeting of the board of directors, the two bidders have requested three months of exclusivity to verify the expression of interest with due diligence.
The control of the majority of the capital of ITA by the parent company MSC is not compatible with European rules, since it is a Swiss company, however 51% would be sufficient as the sum of the share of Lufthansa and that of our Ministry of Economy and Finances to respect the constraint of the majority in the hands of community subjects. In turn, Lufthansa no longer has the ban on the acquisition of other carriers, which was imposed on it by the EU when it authorized the recapitalization of the company in 2020 and a set of public guarantee loans for a total of over 11 billion euros during the Covid crisis, considered state aid. The group, in fact, returned, but in reality renounced to have, over 75% of the aid granted, largely unused, demonstrating their unnecessary need and how generous the EU Commission had been towards it. The news of a Lufthansa entry, assumed to be 40%, had already emerged in recent days, but promptly denied. And on the occasion, MSC was in no way included, which is now an absolute novelty.
In essence, the announced operation is technically feasible, not in contrast with the rules in force. But is it also opportune and advantageous for those who propose it? Let's first evaluate it from Lufthansa's point of view. Who will explain the operation to the shareholders of the large German group and to the workers' unions, which supervise as members of the supervisory board? Before Covid, in 2019, the group had a turnover of over 36 billion euros and achieved industrial margins of 1.9 billion, but in 2020, due to the effects of the pandemic, revenues fell below 14 billion, in the face of industrial costs for almost 21 and a negative margin of over 7. Finally, in the first nine months of 2021, revenues were almost identical to those of the same period of the previous year and only the containment of costs made it possible to contain losses in 2 billion further, destined to approach 3 in the whole year. Is it possible that with these numbers it could be interested in acquiring a company like ITA, heir to another, Alitalia, which has been in structural loss for over twenty years? And in fact she doesn't seem so intent on it.
In fact, the German company reiterated, when asked by Sole 24 Ore , that for now it is only interested in a commercial partnership while a possible participation in the capital is only conceivable in the long term: "Only MSC has expressed an interest in acquiring a majority stake in ITA. Lufthansa, as it has always said, is only interested in being ITA's commercial and industrial partner, not in acquiring a shareholding ". This is the answer that was given to the Sole 24 Ore .
At this point it is clear how the offer has started and has MSC as its main actor, known to the general public for cruise ships, with which it invoices every year a little less than the old Alitalia before the switch to ITA, but mainly a shipping container company. , a segment of which it is one of the largest operators worldwide. As this is a large and highly profitable group, there is no doubt that it has all the financial characteristics to be able to take on ITA. However, the key question remains the one already posed for Lufthansa: does it suit you?
In the opinion of the writer, the answer is negative and this for two reasons. In the first place, the synergies with MSC's industrial activities are very limited: commercial agreements with air carriers, which actually already exist, are sufficient to carry out air feederation of the cruise terminals, while the cargo air transport activity concerns high value goods. in relation to weight, therefore the opposite of those traveling in containers, and it is very profitable in this period precisely due to the fact that many long-haul flights have been canceled due to Covid and therefore the goods that previously traveled in their holds must now be seated on cargo-only flights. Basically, the cargo segment is so profitable for the same reasons that the passenger segment is making a big loss. Secondly, the losses of ITA in the first months turned out to be much greater than any more pessimistic forecast and should therefore be such as to drive away even the most fanatic entrepreneur who loves air flight.
These numbers were given by the president of ITA Altavilla himself in two different sessions of a hearing at the Transport Committee of the Chamber. while in the first he had indicated revenues at 88 million. Adding the two figures, it is clear that Ita incurred in the final two and a half months of 2021 a total of 258 million in industrial costs, of which only 88 million recovered with revenues and the other 170 lost. Basically, for every euro of receipts he had three euro of costs and two of losses. What other "market" company has similar values? Let's not forget that the state Alitalia of the early 2000s, which was sold in 2008 to the famous brave captains, had about 9 euros of revenues for every 10 of costs and that the last private Alitalia, managed first by Etihad and then by the extraordinary commissioners, he had about 5 euros of revenues for every 6 of costs.
Given that the passengers transported by Ita in 2021 were 1.26 million, the average per capita income was only 61 euros, an average low-cost carrier amount that is not surprising. In fact, ITA operates almost exclusively on national and European routes on which it suffers competition from low cost and therefore the prices it can charge those imposed by competitors. If we divide the total passengers by the flights performed, we see that they do not reach 80 per flight, exactly half of the average capacity of the fleet used in this period. At this point we can ask ourselves how ITA's accounts would have gone in the best hypothetical hypothesis, the totally theoretical and impossible one to 100% fill all the flights made. In this case, the revenues would have been double with substantially equal costs and ITA would have recovered with the revenues two thirds of the costs incurred instead of just one, losing the residual third. Even in this extreme hypothesis, the degree of cost recovery would have been the worst among all Alitalia, public and private, which we have seen over time .
These figures show that ITA is a meaningless industrial project and it is surprising that a government with considerable economic expertise at its top has not understood it.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/smartcity/msc-fara-davvero-volare-ita/ on Sun, 30 Jan 2022 14:46:50 +0000.