Alitalia going nowhere

Amid all the despair at Italy’s election results, it rather went unnoticed that Alitalia posted heavily increased losses for last year (from €69 million up to €280 million) and the Chief Executive suddenly resigned.

Of course, Alitalia has been lurching from crisis to crisis for years but the last restructuring programme was very much a last chance. A new shareholding comprising of the “great and good” Italian insititutions and leading companies was cajoled by Berlusconi to take a 70% share leaving Air France/KLM with the rest. The “new Alitalia” did have some success  in reducing losses and avoiding the crippling strikes the airline was famous for. Unfortunately, it did not make any effort to go beyond that so on-board standards are now acceptable but, in most cases, at the lower end of the scale. No one is ever likely to actively choose to fly Alitalia because of great service.

In the old days, the airline had a profitable monopoly of domestic routes and was able to work in a duopoly with other carriers in the rest of Europe. Maybe because of that rather comfortable position, the airline did not bother too much with longhaul routes. Now that is coming back to haunt them.

Iberia is in a fairly similar position but IAG will persevere with it because it still has a very valuable position Latin and South America. Longhaul is what keeps European scheduled airlines going and those who succeed are doing so on the back of long-established colonial and trading connections. Despite Mussolini’s best efforts, Italy’s efforts at colonisation were a failure.

There are all sorts of rumours that Air France/KLM will now buy the rest of the shares in the airline (a lock-in clause on the Italian investors has just expired) but they do not have any money. Another possibility is that Etihad might get involved with some arrangement to lend Air France/KLM the money so it could be involved in the background whilst keeping Alitalia a European-owned airline. But you have to ask what Alitalia has to offer.

It has a poor reputation. It’s domestic routes are under siege from budget airlines. Ditto its European network. And it has a very limited longhaul network.

It is hard to see anything worth buying.

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