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Alitalia Is About To Land For Good But The Legal Battle Is Far From Done

The legal battle between Alitalia and the Italian government is far from over | Alberto Pizzoli/AFP via Getty Images Buckle your seatbelts!

Although you may be able to fly Alitalia for the last time this summer, the legal saga surrounding the legendary Italian airline is far from over.

After months of negotiations with Brussels to ensure that Rome’s rescue plan complies with EU legislation, the Italian government announced on Thursday that the struggling flag carrier will cease operations on October 15, when its new public-owned successor, ITA, will take off.

“Discussions with the European Commission have allowed us to negotiate a constructive and balanced solution that ensures the discontinuity required by European legislation,” the Italian Economy Ministry stated, adding that ITA will begin flights on October 15.

Alitalia’s operations will be suspended on the same day.

Brussels, on the other hand, sounded cautious.

“The Commission takes note of Italy’s announcement today,” a representative for the European Commission said in a statement, adding that “no formal decisions have been taken at this moment” on Alitalia’s restructuring or other pending state assistance investigations.

The EU’s competition watchdog also stated that it “remains in regular touch with the Italian authorities to ensure that the launch of ITA as a new and viable market participant is in compliance with EU state aid laws.” Earlier this year, Brussels expressed reservations about the formation of a new public-owned business to replace faltering Alitalia, with an initial capital of EUR3 billion.

The Commission was particularly concerned about the two firms’ ostensible economic continuity, as well as Rome’s initial plans to transfer certain of Alitalia’s assets to ITA without holding a public tender.

Such roadblocks were removed following talks with Brussels.

The government said Italy can now proceed with cash payments to ITA and a memorandum of understanding to transfer certain of Alitalia’s activities to its successor.

In a letter delivered to Italian authorities on Thursday, the European Commission approved the company’s industrial plan, according to ITA.

A few hours later, the ITA board of directors adopted the revised industrial strategy and issued a statement outlining some critical figures for the company’s future.

ITA will begin with 52 planes and expects to have 105 planes in service by the end of 2025.

Last year, the previous Italian government, led by Giuseppe Conte, decided to establish ITA, a new public-owned firm with an initial capital injection of EUR3 billion.

ITA will start operations with a EUR700 million injection under the latest proposal, discussed by ministers in Prime Minister Mario Draghis’ cabinet, and will receive the balance later.

As Draghi put it earlier this year, Italians regard Alitalia “as a family thing, even if a little pricey.”

Transport Minister Enrico Giovannini claimed the new business will work “with a eye to innovation and digitalization, in line with the European principles underlying the National Recovery and Resilience Plan,” in an attempt to prove that Brussels and Rome are now completely on the same page. Yet the tale is far from done, for at least two reasons.

ITA will begin flying in a challenging economic environment, with a general decline in flights due to the coronavirus outbreak, potentially necessitating further public assistance, which could require EU approval.

Furthermore, the Commission must yet assess whether two prior tranches of public assistance, totaling around EUR1.3 billion and given in 2017 and 2019, are illegal state aid.

ITA and Alitalia should now be regarded separate firms if Rome and Brussels have agreed on what “economic continuity” entails.

As a result, if Brussels decides that subsidies were illegal, it will be up to the former Alitalia to return any incorrect state aid.

“The Commission’s fundamental goal is to reach legally sound conclusions as quickly as feasible,” said the EU executive.

Yet this isn’t the first time EU has promised a verdict on Alitalia’s prior help in the near future.

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