Milan Malpensa airport looking for a non-European partner

Implications: Alitalia's new business plan abandoning Milan Malpensa airport opens the door to any non-European airline willing to make Malpensa its European hub, in one of the richest cities of Europe.

Analysis: Yesterday the board of directors of Alitalia approved a new business plan, trying to drive the company out of the financial crisis. In the last months the Italian government tried to sell its controlling stake in the company thorugh an International auction, which failed because of restrictions against lay-offs. Now the biggest chance is to convince Air France to enter the company through a capital increase. Meanwhile Alitalia has announced it will focus on Rome Fiumicino airport (FCO), closing European and International routes from Milan Malpensa airport (MXP). There are two main reasons: a) Air France's hub Paris CDG is too close to Milan, the French airline doesn't want competition from there; b) the Alitalia unions always opposed the transfer of employees from the historial hub in Rome to Milan. The decision seems weird also for another reason: some 70% of the air tickets in Italy are sold in the Milan area.

Milan Malpensa, a major International airport in one of the richest cities of Europe, which was born as the new hub of Alitalia, will progressively become an 'orphan' airport with no major airline using it as a hub. The local governments of all Northern Italy are very concerned by this, and they're looking for a new partner. The airports of Milan - Malpensa hub and small city airport Linate - are owned by SEA, a company controlled at 85% by the City of Milan.

Non-European airlines, such as those from Far East or Middle East, may be interested in making Malpensa their European hub. Some names circulated recently inclue Emirates and Air China. But apparently even American Airlines is considering such a possibility. The solution is not easy, considering that: a) some Eastern airlines belong to alliances such as SkyTeam (now focusing on Paris CDG and Rome Fiumicino) and Star Alliance (focusing on Zurich and Munich airports, both too close to Milan), which may not like the introduction of Malpensa among their European hubs; b) there would be limits to non-European airlines according to the Single European Sky regulations; c) the market for airport slots in Italy is totally controlled by the Ministry of Transport, and therefore any decision on Malpensa's partner should have the full support of politics.

On top of that, the City of Milan is trying to privatize SEA (Milan airports) after the failure of the privatization auction in 2005. The main reason for that was the uncertainty of the future of Malpensa, since Alitalia was already considering to focus more on Rome Fiumicino. If an airline partner will be found, the City of Milan will quickly proceed to the sale of its stake into SEA. According to Italian regulations, an airline can't own an airport. But there is a potential role for any investors - including private equity - willing to make this bet.