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Aviation History
1987
1987 - 0009.PDF
AIR TRANSPORT Alitalia accelerates towards change ROME Alitalia retains a distinctly equivocal attitude towards the approach of deregulation in the European Community (EC), yet today everything it is doing seems geared to preparing for a future which includes increased com petition within the Continent and from across the Atlantic. There is something in the Italian state-owned carrier's current style which is remi niscent of an awakening giant becoming aware of the power at its disposal: for example last year it launched a number of promotional low fares in its considerable domestic market and confessed to being amazed at the market's response—a 30 per cent passenger traffic increase on the affected routes. The decla ration was made as if by one who had not realised the power of prices. There is little doubt that a few years ago the emergence of a third-level scheduled airline operating domestic and international flights from an Italian base would have been resisted (probably successfully) by Alitalia. Today, however, it is undoubtedly pleased to see Jetstream operator Aliblu (in which it has a 10 per cent shareholding) setting itself up at Naples to serve smaller communities in the south, and cross-border routes like Naples-Marseilles, Milan- Hanover, and Brindisi-Corfu. Theoretically the giant could have gone on sleeping for a while yet: the Alitalia Group has been making pro fits for the last six years, and it will announce one for 1986 despite last year's collapse of American tourist traffic into Europe—particularly south ern Europe. Alitalia and its subsidiary ATI have enjoyed both a virtual home-base monopoly on domestic and international traffic and an owner/Government reluctant to open new international gates to foreign airlines. But in recent years the signs of relaxation have been emerging—for example the opening of Genoa and Milan to British Caledonian: Genoa was a new gateway and Milan was already served by a British carrier. Alitalia's North American traffic dropped by 11 per cent last year against 1985 figures, while the lata carrier total suffered only a 7 per cent drop, and the Association of European Airlines carriers' traffic took a mere 1 • 7 per cent fall. However, to put those figures into context, the industry as a whole saw USA- Italy passenger traffic fall 26 • 1 per cent, which shows that it was US passengers and US airlines which took the brunt of the effects of the weak dollar, Chernobyl and European terrorist activity. Americans are already returning to Italy, Alitalia says, and polls taken in the USA indicate that a major marketing campaign there has been a success. The sharp and drastic capacity trimming which kept the North Ameri can services commercially viable during 1986 has now been turned around, and traf fic is expected to be up by 20 per cent. The Italy-North Africa routes, which have been a reliable and profitable market in the past, dropped 44 • 2 per cent on traffic performances from 1985 to 1986; in the words of senior v-p programmes Ferruccio Pavolini, "the North African market has collapsed alto gether and has not improved again". While Alitalia's 1987 plans for America are simply to restore capacity to pre-1986 levels, Europe is the target for aggressive expansion. The Group's airlines will operate to seven new European desti nations and increase their service frequencies to others. The result of all this will be a 27 per cent increase in the number of flights and a 15 per cent increase in the number of seats offered, the difference being accounted for by the fact that smaller aircraft will be used increasingly. ATI's fleet of twin turboprop ATR42s will have increased to six by summer. Domestic services will offer 7 per cent more seats, and will also introduce inflight cabin service on all but the shortest flights. Alitalia has not operated to China until now, but on March 29 inaugurated a weekly Boeing 747 Combi service to Shanghai, routeing Rome - Delhi - Shanghai - Tokyo. Why Shanghai and not Beijing? "It's better to be first in Shanghai than last in Beijing", muses Pavolini. The Alitalia Group's char ter operations increased turn over by 8-45 per cent on the previous year. But the Group's best results came from Aeroporti di Roma (in which Alitalia owns a 56 • 2 per cent share): this company runs Rome's Fiumicino Airport, and its anticipated 1986 profit is expected to show a 4 • 2 per cent increase, which will give a 25 per cent return on capital. Pavolini's favourite phrase when discussing European Community deregulation is "step by step": "We think we have to develop competition progressively to arrive at 1992 with all companies at the same level," says Pavolini. "Deregulation will lead to success for the most efficient companies. But if that were to happen," he continues, "competition would be elimi nated. Would it be possible for European Governments to ignore the demise of national companies without stepping in with support"? In the meantime Alitalia's answer to the European Commission's charge that it uses anti competitive practices contrary to the Treaty of Rome is the traditional one: it is the Government which makes bilateral aviation agreements; we just do as we are told. In three or four years Amer ican airlines will be the enemy, according to Pavolini: "We will never be able to match a network of 27,000 travel agents and 50,000 passengers a route... I believe it will be necessary to pool the forces of two or three big European airlines." On computer reservation systems (CRS), Pavolini talks of the need for a pan-Europe CRS which will then integrate with the big US systems. Will Alitalia go private? No, says Pavolini. The maximum private share holding allowed by law is a third of the stock, and already 33-3 per cent is privately owned. The law is intended to prevent foreign control of the carrier. Alitalia's fleet consists of MD-80s like this, and DC-lOs, DC-9-30s, and Boeing 747s. Now subsidiary ATI flies ATR42s FLIGHT INTERNATIONAL, 4 April 1987
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