German Efromovich, the former Avianca owner, is interested in buying the troubled Alitalia. While there’s still a long way to go, Efromovich has been interested in Alitalia for a while now. What does this mean for the bankrupt Italian airline? Let’s investigate further.
Who is German Efromovich?
Efromovich is a Colombian-Bolivian businessman born in 1950. He is the owner of Synergy Group, an industrial conglomerate that had the majority stake in Avianca until last year.
In 2004, Efromovich bought Avianca, and Synergy Group acquired 75% of the South American carrier group. A year prior, Avianca filed for a Chapter 11 bankruptcy, as it entered into a reorganization phase after the 9/11 air industry crisis.
With the new administration, Avianca thrived. It positioned itself as the second most important airline in South America, right behind LATAM Airlines Group.
During this time, Avianca extended its operations in several Latin American countries with branches in Colombia, El Salvador, Peru, Argentina, and Brazil. At some point, there was a discussion of launching Avianca Mexico, in collaboration with Mexican airline Aeromar. It never happened, and the current Avianca administration no longer plans an investment like that.
Nevertheless, in 2018, Efromovich lost control of Avianca Holdings. It happened after United Airlines loaned US$456 million to Synergy Group. Last year, United forced a takeover of the airline, and Efromovich was sacked of its airline.
Why Efromovich likes Alitalia?
In 2019, when Efromovich was still in Avianca, the businessman said he was interested in acquiring 30% of Alitalia. He said,
“Alitalia is a great company. I can’t understand how it can lose money. I can put it back together in six months. Fourteen years ago, I bought Colombian carrier Avianca, when it had 34 airplanes and 4,300 employees. I’ve cured it, and now it has 189 airplanes and over 22,000 employees. The revenues went from US$350 million to US$4.5 billion.”
The businessman wants to build a new Alitalia under three pillars: aviation, maintenance, and ground services, according to Gestión.
We contacted Alitalia. At the moment of publication, we had no response. We'll keep you updated if that changes.
We can understand the appeal of Alitalia. In theory, it has a significant market as Italy is one of the tourist hotspots of the world. The problem is that the airline can’t compete with low-cost carriers in Europe nor with long-haul operators in other continents. As a government-managed airline, it has a mostly unionized workforce and a bloated budget. Additionally, it is bankrupt since 2017.
Where’s Alitalia at the moment?
As the pandemic ends in Italy, Alitalia is announcing the restart of its operations. From 2 June, the airline will operate its flights again to Spain and New York. Additionally, it expects to have a 36% increase in its number of flights compared with May, by relaunching 30 routes.
A couple of weeks ago, the Italian Government was ready to inject more than $3bn into the carrier. Previously, the airline furloughed 6,622 workers until October.
Additionally, Alitalia’s new management is analyzing its membership at the SkyTeam alliance. It is also reevaluating its route network with a strong focus on long-haul routes. But we could also see a smaller Alitalia, as the carrier could shrink its fleet from 92 aircraft to between 25 and 30 aircraft.
While it could be tempting for the Italian Government to hear a proposal from German Efromovich, there is still a long way to go before a real deal occurs. But if it does, maybe it will mark a new era for Alitalia.
Do you think a private investor could improve Alitalia’s operation? Let us know in the comments.