Alitalia has revealed record first half losses of L342 billion ($160 million) before tax and extraordinary income - three times the size of losses during the same period of 1999. The airline says the poor performance is the result of rocketing fuel prices and the rising value of the US dollar, which together have produced extra costs worth L330 billion.

The high fuel costs, against which Alitalia started limited hedging operations last September, have wiped out the recovery starting to come from the airline operations. Turnover increased by 14% to L4,915 billion and the passenger traffic in the first 8 months of the year rose by 13%, with the cargo traffic increasing 20%.

Costs are proving a serious problem on a wider front than fuel prices. Labour costs, for example, have grown by 6.2% during the period.

Alitalia forecasts that fuel will cost L270 billion more in the second half, although the commercial recovery should allow it to close the year with an operating loss only L8 billion more than in the first half. Extraordinary income, primarily from the sale of its remaining stakes in Galileo and Equant, should reduce the balance sheet damage.

Source: Flight International