Despite soaring hopes, Air Italy grounded by soaring debt

Air Italy, once envisioned as a challenger to troubled flag carrier Alitalia, has been put into liquidation, with investors Qatar Airways and the Aga Khan citing "persistent and structural conditions" in the market.

Shareholders of the two-year-old airline acted unanimously and the Italian carrier will guarantee flights scheduled through February 25 by other operators, Air Italy said Tuesday in a statement.

Qatar Airways said separately it was prepared “to do its part to support the turnaround and the growth of the airline,” but that would have been possible only with the commitment of all shareholders.

Air Italy had losses of about €200 million in 2019 and €160 million in 2018, and cancelled flights to New York and Lagos on Monday.

The collapse of Air Italy comes as the Italian government seeks a buyer for the former national carrier Alitalia, which was put into special administration in 2017. Alitalia, which is in bankruptcy for the second time in a decade, is surviving on a government bridge loan.

Italian transportation Minister Paola De Micheli earlier called for an “urgent meeting” with Air Italy and asked for the suspension of any decision about its future until relevant ministers have discussed the matter.

Air Italy started operating in March 2018 after Qatar Airways bought a 49% stake in a predecessor, with the Aga Khan’s Alisarda owning 51%. Qatar Airways’ purchase was part of Chief Executive Officer Akbar Al Baker’s strategy to use outside investments to boost revenue and cash amid a Saudi-led embargo restricting its own flights.

The U.S. and Qatar have recently been at odds over whether Qatar Air’s stake in Air Italy was meant to undercut U.S. competitors, despite a previous deal between the two nations.

The Aga Khan, who founded the carrier as Meridiana in 1963, doesn’t want to provide additional funding and Qatar Air can’t boost its stake above 49% because of European Union rules.

The Italian airline operates domestic and international flights and its fleet includes eight Boeing 737s and five Airbus A330s, according to the company’s website.