Alitalia has entered the alliance game once more. Fifteen months after the tie-up with KLM collapsed, the Italian flag carrier has thrown in its lot with Air France, Delta Air Lines and SkyTeam.

Under the two separate memoranda of understanding signed by the Italian airline in July the carriers will develop codesharing arrangements, link frequent flyer programmes, co-operate on cargo and passenger handling services as well as seek synergies in information technology. Alitalia and Air France will also be working together on maintenance.

The tie-up with the French flag carrier, which is expected to be sealed with a commercial agreement shortly, should be delivering L200 billion (€100 million) in additional operating profits to Alitalia by year three, it is understood.

The alliance with Air France dashes hopes said to have been entertained by former chief executive Domenico Cempella of going it alone in Europe. It also ends the airline's "strategic isolation", as new boss Francesco Mengozzi puts it. It marks an acceptance by Alitalia's that it will have to play a junior role in a global alliance, which was partly the reason for the failure of the deal with the Dutch airline.

The much larger Air France will initially operate 60% of codeshare flights between France and Italy and beyond, which are expected to commence April next year, qualifying it for 60% of the revenues generated, sources close to Alitalia say. Analysts say the French carrier's dominance will probably be more pronounced.

Alitalia stands to gain plenty, however, starting with the recapture of an estimated 900,000 passengers a year who connect from Milan to the hubs of its rivals - excluding Air France - to benefit from more extensive long-haul networks. This comes back to the issue of the supposed closure of Milan Linate when the new Malpensa airport opened in 1998. With Linate still open, many travellers have preferred to use this downtown airport to connect to other European hubs for intercontinental services, rather than use Alitalia's direct offerings from Malpensa. While Alitalia says the Air France alliance is focused around a three-hub system of Rome, Milan and Paris, a main focus will be on feeding the powerful Charles de Gaulle airport. With Air France gaining access to Europe's fourth largest market and Alitalia winning back customers in its home territory, the deal's logic is convincing, say analysts.

Some argue that as long as state-ownership remains - the Italian Government has a 53% stake in Alitalia and the French state holds 57% of Air France - concerns will remain over meddling politicians. But Chris Tarry, an analyst at Commerzbank, points out that Air France's "straightforward" approach to alliances has worked well with partner Delta. The fact that there are no plans on equity - although this has not been ruled out for further down the line - does not have to be negative, given Alitalia's failed merger with KLM, if a good commercial agreement and the right management are in place, he adds.

The combination of the two European carriers will substantially boost transatlantic market presence. But it will be Delta that will finally give Alitalia a strong transatlantic partner, enabling the latter to take advantage of the Italy-US open skies regime and to access the US market following its lacklustre deals with Continental and Northwest Airlines.

Source: Airline Business