To have the European green light for take-off, Italy Transport Airplane may have to sell more slots at Milan Linate airport than those left in its airports by Lufthansa, Air France and KLM – put together – in exchange for aid and public loans for over ten billion of Euro. If we then go to see the impact on the total owned in the airport, the Italian newco would be forced to get rid of a much greater share than its rivals, up to 36 times more. This is what emerges from the analysis that the Corriere della Sera carried out exclusively by cross-referencing institutional and community sources with official documents, reports filed with the EU Antitrust, the financial statements of the airlines and the material delivered to shareholders.
Slots are an important operational entry for carriers. Since these are hourly take-off and landing rights at an airport, they form the “backbone” of the network of connections. Without them the company cannot move. Those working on the dossier in Rome explained that the technicians of the European Commissioner for Competition Margrethe Vestager asked the new Alitalia – which can count on a maximum of 3 billion euros – to sell up to half of Linate’s slots. Sources of the EU Antitrust explain to Courier service never having given the government a number, but expecting a proposal from the Italian delegation on the starting fleet of the newco (which will be less than half of the current airline). Rome would like to free up no more than twelve slots a day, so as to allow rivals six roundtrip flights a day.
The Italian reaction
The Italian government and the leaders of the newco created to relaunch Alitalia deem the European request to sell a slice of Linate slots unacceptable, oppressive and discriminatory – if you look at the sacrifices requested in Europe – stalling the negotiations with the Commissioner for Competition Margrethe Vestager. But this is a measure that is seen by Brussels not only as necessary to demonstrate a certain discontinuity between companies, but also as a consequence of what is yet another attempt to rescue an airline that has not produced profits for over twenty years. .
But how are things? The documents consulted by Courier service show that at Linate airport Alitalia holds almost 67% of the slots, more than those in the hands of Air France in the Paris Charles de Gaulle and Orly airports (just under half of the total allocated) and also of the Lufthansa group in Munich Bavaria and KLM in Amsterdam which slightly exceed 50%. But the figure of the tricolor carrier is much lower than that of the Lufthansa group in its main hub, Frankfurt, where the giant has more than 90% of the take-off and landing rights.
The Lufthansa case
To cope with the health emergency that has almost eliminated air transport, the Lufthansa group has asked for an aid package from the German government. In exchange, the European Commission obtained the release of 24 daily slots at each airport (Frankfurt and Munich) in particular as a counterpart for the 6.8 billion euros of support directly or indirectly linked to the state (out of the total 9 billion). Lufthansa thus had to hand over three flights a day to four different rivals. From the European Commission explain to the Courier service that if a state grants a company more than 250 million euros in aid, the market would be distorted and thus measures are needed to preserve competition (such as the sale of slots).
The Air France-KLM chapter
In recent weeks the Air France-KLM group (28% public) has been re-discussing the financial support obtained. The French government has allocated 7 billion euros for Air France and the Dutch 3.4 billion for KLM. On Tuesday 6 April the agreement between the EU Antitrust and Paris was announced for the conversion of 3 billion of state loan into capital plus another billion of funds. The same for KLM (worth one billion). In exchange, Air France will have to sell 18 slots at Paris Orly airport, more or less the same that KLM in Amsterdam has to give up. Orly’s slots are important because movements are limited to 250,000 per year and above all because the airport is closer to the center of Paris than Charles de Gaulle and is part of the expansion plan of the low-cost Transavia division.
The “sacrifices” required
The comparison on the “sacrifices” required shows the gap between Alitalia and the other European companies. If the EU Antitrust asks Italia Trasporti Aereo – the public newco created to relaunch the tricolor carrier – to do without even half of the slots, according to the documents Air France would be asked to sell almost 6.5% of the take-off rights and landing at Orly. Even less for Lufthansa in Munich and KLM in Amsterdam with a reduction of almost 3%. Almost no counterpart in Frankfurt where the German giant gave less than 1.5% of its slots to competitors. The approach, the EU reiterates, cannot be the same: in the case of ITA it would be a carrier that is born from the ashes of a company that is always at a loss (and on which two investigations are pending for alleged state aid of 1, 3 billion euros). For Lufthansa, Air France and KLM, aid is linked to the coronavirus since these are profitable companies until 2019.
The value of each slot
The analysis also makes it possible to obtain a sort of “exchange” on the value of slots in European airports (which, however, cannot be bought and sold by law, unlike what happens at London Heathrow). And here it is the French who win. Against the capital conversion of 4 billion euros, each take-off or landing right sold to Orly would thus have a value of over 220 million euros, just over the 142.5 million euros of those in Frankfurt and Munich. Slots in Amsterdam are more “affordable”, valued at around 50 million euros if we look at those that KLM should sell to change the nature of the billion in loans. And the slots at Linate? If the hard line were to pass – the sale of half of Alitalia’s slots – their “price” would be around thirty million euros, five times less than Orly’s.
(Article updated with the formalization of the France-EU agreement on the 4 billion aid package)