Alitalia is a leading Italian airline that has faced financial difficulties and related restructuring projects over the years. In May 2017 the Ministry for Economic Development, on Alitalia’s application, resolved to open the special insolvency procedure (‘extraordinary administration’) pursuant to Law 39/2004 (for further details please see “Alitalia recovery plan takes flight“). The procedure is available for large insolvent companies and its main purpose is to preserve employment levels and production assets by implementing a recovery plan that can imply either the financial restructuring of the company or the sale of the business with the continuation of activity. In turn, the business can be sold either as a whole or part by part.

During the past 18 months, the extraordinary commissioners of Alitalia have received several expressions of interest from prospective investors for the acquisition of either the entire aviation business or a portion of it (eg, specific aircraft, slots and contracts). The financial restructuring option has seemingly not been considered thus far.

Following detailed evaluations by the commissioners and several due diligence activities by the interested parties which were admitted to review the files of the airline, the Italian government extended the deadline for completion of the sale of Alitalia, as well as the term for repayment of the €900 million loan granted to the carrier.

Three prospective investors presented more structured offers within the deadline of 31 October 2018 (as extended by the commissioners). According to the information publicly available, two of these offers – from Italian railway company Trenitalia and UK carrier EasyJet – should be binding, although subject to many conditions. The other offer, from US carrier Delta Air Lines, came in the form of an expression of interest. The offers are subject to strict confidentiality commitments and certain investment conditions. In particular, according to the press, Trenitalia would invest in the airline only by way of a joint venture with other companies, while EasyJet would be interested in a restructured business only.

This run of offers represents a step forward in the sale of Alitalia’s business, even if negotiations must still be carried out in the next few months. The sale would most likely happen through an asset deal (sale/contribution of Alitalia’s business and assets), rather than a share deal. In particular, according to the information reported by the press, the awarded investors would set up a newco to which Alitalia’s material and immaterial assets would be transferred. The newco would also succeed to the contracts and agreements of Alitalia which are part of the transferred business.

In the meantime, the business and operations of Alitalia continue to run under the extraordinary administration rules. From a legal and commercial perspective, the main consequences of the procedure on the day-to-day activity of Alitalia are as follows:

• Outstanding agreements continue to have full force and effect, although the commissioners are entitled to terminate early at any time in light of the needs arising from the recovery plan.
• Credits against the airline accrued prior to the start of the procedure (2 May 2017) can be admitted to the insolvency table and, at a later stage, repaid on a par condicio creditorum basis according to the arrangement prepared by the commissioners to satisfy the creditors.
• The airline is committed to regularly perform its obligations accrued after 2 May 2017, including payment of lease rents and supply services.

For further information on this topic please contact Laura Pierallini at Studio Legale Pierallini e Associati by telephone (+39 06 88 41 713) or email (l.pierallini@pierallini.it). The Studio Legale Pierallini e Associati website can be accessed at www.studiopierallini.it.

This article was originally published in International Law Office by Laura Pierallini on December 12, 2018.

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