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06/03/2009 – The New Alitalia Is Nearly Two Months Old…Is It Going The Right Way?
The merger of Alitalia and Air One is now nearly two months old. Despite the merger, the massive cash infusion, the sale of Alitalia Cargo and Air France-KLM‘s investment in the airline, the path Alitalia seems to be taking does not appear to have altered. Despite Alitalia being taken over by new management, and merged with Italy’s #2 airline Air One, the carrier is on track to lose an estimated €200,000,000 during 2009!
Since ‘The New Alitalia” has been launched nearly two months ago, overall the airline is flying at only 59% capacity. A 59% capacity load may seem low, but it is actually a positive sign, as the carrier is up from previously flying at only 43% capacity. On routes where Alitalia should be the significant dominant carrier, such as New York (JFK) to Milan (MXP) passenger capacity is down 25%. On routes where Alitalia faces direct competition, their passenger loads are down by approximately 50%.
Another factor that will potentially cause significant problems is the introduction of Lufthansa Italia SpA, Lufthansa’s Italy based airline. Lufthansa, the German national flag carrier has a very loyal flyer base, a well-respected frequent flyer program, an excellent reputation and a track record for reliable service. Presently Lufthansa Italia is establishing a hub in Milan and seeking to start up service on the Milan (MXP)-Rome (FCO). The MXP-FCO route will compete head-to-head with Alitalia on one of the busiest routes in Europe.
‘The New Alitalia’ still faces tremendous labour problem, schedule disruptions by 24-hour walkouts and the not-so-occasional Union organized wildcat strike. What is the Union protesting now? The new management team.
So where does this leave Alitalia? It leaves Alitalia in a pivotal moment in the company’s history. The airline managed to dodge liquidation, the airline was given a renewed lease on life as Italy’s national flag carrier by a massive cash infusion by CAI and its merger with Air One. When ‘The New Alitalia” was relaunched this past January 13th it was in a position to either move forward…or fail horribly destroying both Alitalia and Air One.
Alitalia has resources available to make changes. The airline is streamlining its fleet, consolidating long-haul operations and is in a good geographic location to move passengers between North America/Asia and Europe as well as be a transit point for flights into the Mediterranean and North Africa. Alitalia is now also 25% owned by Air France-KLM. Air France-KLM is one of the largest airline groups operating in Europe, and it is also a member of the SkyTeam Alliance, along with Alitalia. If Alitalia looks towards Air France-KLM for support it can use many assets in place to be attractive to flyers both within Italy as well as internationally.
Hopefully Alitalia is able to address major service issues, customer service issues, vastly improve its customer experience and adjust its overall corporate culture. If the airline is able to adjust rather than move forward as ‘business as usual’ it may just succeed. If the airline continues to operate as ‘business as usual,’ Alitalia’s renewed lease on life will be short lived.