October 15th saw Alitalia flight AZ1586 touch down at Rome’s Leonardo Da Vinci Airport and draw a close to the airline’s 75 year history. Since 2000 Italy’s national airline had only one profitable year and 2017 marked the beginning of the ultimate demise as state-appointed administrators stepped in to avoid liquidation spending an eye-watering $9 billion in the last three years in a bid to keep the airline running. Alitalia was once the pinnacle of aviation opulence with cabin crew wearing Giorgio Armani designed uniforms serving Italian Prime Ministers, primadonnas and popes.
Losing a battle on two fronts
Not only is Pope Francis now in search of a new airline for his papal visits, political infighting at the collapse of such an iconic company has come to the fore. The far right Brothers of Italy party blamed the Draghi government for not doing enough to save the airline; however, the death knell of Alitalia was sounding years before. The airline had been losing $83,000 a day for the past decade as it fell prey to the difficulty of not retaining a niche in the increasingly cutthroat European aviation market. In 2014, Etihad took a 49% stake in Alitalia for $650 million with a promise to turn around financial woes. That glimmer of hope receded as Alitalia consistently was unable to adapt to the evolving trends in short and long-haul aviation.
In Europe, Alitalia return flights from Rome to London averaged around $170 compared to easyJet’s $94 or Ryanair’s $62. A similar pattern occurred across flights from Rome to Paris, Brussels, Madrid, Athens and Lisbon with Alitalia charging an average of 120% more compared to low cost airlines in Europe. The past few years have hailed an emergence of even more ultra low cost airlines such as Wizz Air, Smartwings and Vueling all further infringing on the little market share Alitalia was able to retain. Whilst these airlines may not always necessarily offer direct flights, passengers seem willing for a connection in order to save some money. This is a phenomenon that other European national long-haul carriers such as KLM, Air France and British Airways are continuing to contend with amidst patchy results.
The trough from which Alitalia could seemingly never recover were repeated disastrous mistakes on its long haul network. Outdated planes, a lack of global coverage and a poor premium product left business travellers seeking to fly with Lufthansa, Air France or the Gulf carriers which could offer a more flexible, reliable and often cheaper service. This was perhaps best encapsulated in October 2013 when Emirates decided to launch a route exclusively from Milan to New York. Alitalia was cornered out of one of its most signature routes with Emirates simply offering everything better at a reduced price. Alitalia’s inability to adapt on both fronts slowly squeezed the life out of the airline to the point that the European Commission did not think resuscitation this time was worth the cost.
What is on the horizon?
Italian Minister for Economy and Finance Daniele Franco stated that a new Italian airline needed to rise from the ashes and that is exactly what has happened. A new state owned carrier has formed called Italia Trasporto Aereo (ITA) with the hope that $1.5 billion from the Italian government will catalyse a new era of Italian aviation. ITA has a fleet of 52 planes and 2,000 employees, a much leaner and nimbler ratio than Alitalia. The hope is that fewer staff, lower costs and more flexibility on key routes will enable the new airline to escape the pitfalls that consumed Alitalia.
That emergence from the shadows may prove tricky given the decades of mismanagement, high staff costs and trade union and political influence that caused Alitalia great strife. Furthermore, 7,000 former Alitalia staff will be placed on a lay-off scheme for the next 14 months whilst ITA gets up and running. The economic plan from the Italian government and European Commission needs ITA to be profitable by 2025 otherwise funding will recede. Given Alitalia only had three years of profitability over its 75 year history, ITA may need a prayer or two from Pope Francis, especially if he is to make it the airline for the papacy.