With Alitalia’s relaunch limping on, time is of essence


The Italian government set out its plans to replace the ever-struggling Alitalia, by launching a substitute airline called Italia Trasporto Aereo (ITA). However, as the local and European governments are still going back and forth for the latter to approve the plan, the timing window to successfully launch the airline might not go back and forth and rather only swing forth. Especially as a lucrative market has attracted very aggressive competitors, including the likes of Ryanair and Wizz Air.

The latest squabble is related to the slots at Milan Linate Airport (LIN), one of the major airports in the second-largest city in Italy. According to sources familiar to the matter, as reported by Reuters on March 26, 2021, the European Commission (EC) demanded that ITA would inherit significantly fewer slots from Alitalia. The EC is yet to approve the business plan of the new flag carrier of Italy, to which the local government would commit €3 billion ($3.5 billion) in order for ITA to kick-start operations.

Squabbling between local and European politicians is only delaying the launch of the new airline, which was previously slated to be by the end of April 2021. The new company, which would put a majority of its emphasis towards short/medium-haul operations in terms of the number of aircraft deployed, would inherit Alitalia‘s old network and the aforementioned aircraft. The goal of launching in April 2021 was set for a purpose, as the new airline would attempt to capture the wave of resurging summer travel.

However, Italy as a market is eyed upon by many airlines. Keeping in mind the fact that despite the pandemic, the likes of Ryanair and Wizz Air have even embarked on a battle on multiple airports within Italy and that the country is host to a number of very attractive destinations for leisure travelers. As that type of travel is predicted to recover first, the heat is on for ITA to being its operations.

Five-year plans

The new full-service carrier has a concrete plan on what it wants to achieve in the coming years, as its draft plan, covering the period between 2021 and 2025 aims to ensure that the mistakes of the past would not repeat, creating an independent and competitive airline based in Italy.

Split into 85% and 15% in terms of short/medium and long-haul routes, the “new Alitalia” aims to be competitive, grow in a sustainable and environmentally-friendly manner, and “to finally create a stable employment,” within the company, as presented by the new chief executive of ITA, Francesco Caio in December 2020.

The new airline was officially established a month prior to the presentation, as the then- Minister of Infrastructure and Transport of Italy Paola De Micheli announced that ITA “will bring Italy to the world,” she said in a post on social media on October 9, 2020.

ITA plans to focus on profitable routes out of two of its main hubs, namely Rome Fiumicino International Airport (FCO) and Milan Linate Airport (LIN), operating flights within Europe and to North America. Plans to fly to Japan and several countries in South America have also been outlined. However, these, much like the new airline itself, will rely on a strategic partner.

If it were to succeed, the new Italian carrier would overcome the odds. This is not the first time that the Italian government attempted to save Alitalia, which entered the current crisis operating under bankruptcy protection since April 2017. In 2008, as the Global Financial Crisis dealt a heavy blow to the global economy, a “new” Alitalia called Compagnia Aerea Italiana (CAI) was formed, buying out the profitable assets of the old company. In a session in October 2020, members of the European Union (EU) Parliament questioned how ITA would avoid the scenario of 2008, when the debt of the airline “was simply transferred to a ‘bad’ company,” as the government assumed the debt and liquidated it, using taxpayer money.

Strategic partnerships

It would not be the first time an Italian flag carrier relied on a strategic partner to ensure its future. In 2014, following a troubled year in 2013 that included arrests of employees of the company due to alleged corruption, Etihad Airways swooped in and purchased a 49% stake in Alitalia. As part of its Equity Alliance plan, the Abu Dhabi-based airline went shopping around the world, including stakes in now-failed airlines like Air Berlin (AB1) or Jet Airways, or airlines that have suffered significant financial difficulties, like Virgin Australia.

Still, the question remains whether there are good alternatives for a strategic partner for the Italian carrier. Could Qatar Airways, which was forced to end its Air Italy venture in early-2020, be an option? It very well could be – then again, much like and even perhaps more than others, the airline has suffered from the pandemic-induced crisis. Investing in an airline that has on multiple occasions has failed to truly transform itself and relied on multiple governmental interventions, some of which are still under investigation by the European Commission (EC), does not sound like an attractive proposition.

Especially as the Italian market heats up, even despite the current circumstances. Ryanair and Wizz Air, two dominant and aggressive low-cost carriers in Europe have already butted heads with one another. “[…] Italy is Italy, a market good for both Business and, of course, leisure,” commented on the Italian market Enzo Zangrilli, a senior aviation consultant at 1Aviation in September 2020.

While the market has opened up a bit, especially with the failures of the likes of Air Italy, Ernest Airlines and Norwegian’s decision to no longer fly long-haul routes, including Italy. As a result, including the fact that everybody took a step back due to the crisis, the market has a gap – the question is whether the gap will be closed by the current players or can ITA swoop in and plug that hole and establish itself firmly in Italy. If it does have the ambitions to do so, Summer will be a crucial period for the airline as travel is set to somewhat recover as more and more people have been vaccinated across Europe.

 





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