Alitalia is not quite out of the woods, but at least one wolf is no longer snapping at the heels of the former Italian flag carrier.
Since thedecision by the European Commissionthat a capital injection of €300 million ($405 million) in October 2013 did not breach European state-aid rules – the deal, Brussels concluded, was made on terms that a private operator would have accepted under market conditions – the main problem facing the airline is the one that has dogged it for years: turning a profit.
The iconic carrier has long been a synonym for financial pain, and by March 2008 enough had become enough even for the Italian government, which had a takeover offer from Air France-KLM. That deal was scotched a month later by unions and incoming prime minister Silvio Berlusconi, but a sale of 49.9% of the airline to a consortium of Italian investors was agreed later in the year.
That group – Compagnia Aerea Italiana (CAI) – ran Alitalia and, as a low-cost subsidiary, Air One, from 2009 until 1 January 2015, when a new Alitalia company – Alitalia SAI (Società Aerea Italiana) – commenced operations.
Owned 51% by CAI, the big change as 2015 dawned was theentry of Abu Dhabi-based Etihad Airwaysas 49% owner, a stake it bought for €388 million.
Now, Alitalia is talking about getting into the black in 2017, when it looks to deliver a profit of some €100 million. The new plan is to end a futile attempt to compete with low-cost carriers and instead to focus on building – or rebuilding – its business as a premium network carrier focused on long-haul services.
In addition to its traditional base at Rome, Alitalia plans to establish a long-haul hub at Milan Malpensa. And, to regain market share in Italy’s northern industrial heartland lost to rivals including Lufthansa, it will build a regional routes base at Milan Linate.
The challenge should not be understated. Over the past five years, Alitalia has lost north of €1 billion. Etihad’s boss James Hogan summed up the Alitalia problem well in late 2014, noting that while it had once been an innovator, it had become shackled by a “public service” mentality.
In Hogan’s view, Alitalia’s routes network can complement Etihad’s. He has described his company’s investment as a long-term bid for mutual growth, and he is “bullish” about the prospects. But turning Alitalia around is clearly going to be difficult, and expensive – and Hogan made the point in January that Etihad “is not a bank”.
Worth noting is that the man at the very top of the organisation is Luca Cordero di Montezemolo, who was appointed chairman in November. Di Montezemolo had headed Ferrari since 1991 and steered the sports car maker through a golden-years revival on the racetrack and in the showroom.
His term came to an end amid friction with the bosses at parent Fiat, but his legacy of good relations with Abu Dhabi includes the establishment of the spectacular Ferrari World amusement park there. Di Montezemolo is also understood to have played a key role in brokering the Alitalia-Ethihad deal.