Latest rescue plan for Italy's ailing flag carrier calls for controversial emphasis on Fiumicino
A central element of the three-year business plan unveiled by Alitalia's newly appointed chairman Maurizio Prato features the reduction of services at Alitalia's Milan Malpensa hub. At the same time Prato is attempting to resurrect the process of finding a strategic partner and investor for the troubled carrier.
Alitalia plans to expand cargo and low-cost activities from Malpensa but will move 14 of the airline's 17 intercontinental services from Malpensa to Rome's Fiumicino airport and cut 150 feeder flights into Malpensa.
Alitalia says its decision to focus on one of the airline's two hubs from June next year was taken for economical reasons. "Rome Fiumicino was chosen over Milan Malpensa because the majority of Alitalia's staff is based in Rome," explains the carrier.
Alitalia stands to lose about E1 billion in revenues as a result of reducing operations at Malpensa. Milan and the industrial north, which are served by Malpensa airport, represent 70% of Alitalia's traffic and account for the largest share of Alitalia's sales of high-yield tickets.
While Alitalia will be able to recoup some of the losses by increasing operations at Rome, the airline lacks slots at Fiumicino and the airport's infrastructure and baggage handling capabilities need to be updated. Fiumicino is also the hub of Alitalia's largest and strongest Italian competitor, Air One.
Analysts question Alitalia's new hub strategy and hold out little hope its latest rescue plan will restore the airline's fiscal health. "The decision to focus on just one hub is a sound business strategy. But Alitalia's decision to focus on Rome rather than on Milan is not the wisest commercial choice," says Robert Cullemore, a senior consultant at UK-based consultancy Aviation Economics. Adds JP Morgan analyst Chris Avery: "We see little to convince us that this plan has any more chance of success than any previous plan."
Both Ryanair and easyJet are poised to fill the gap Alitalia will leave at Malpensa. Ryanair says it is prepared to make the airport a new Italian base, building to 12 aircraft and 50 routes by 2010. At the same time it may boost services at its existing Milan Bergamo airport base. EasyJet is proposing doubling the carrier's fleet at Malpensa to 15 aircraft over the next three years.
Prato is understood to be considering a capital increase of E1.5 billion as part of the rescue plan and aiming to cut 1,000 jobs as well as renegotiate the contract terms and conditions of Alitalia's bloated 20,000-strong workforce. If Prato succeeds, it will be a major coup. Alitalia's trenchant unions have successfully opposed all previous attempts by management to tackle staff numbers and contract terms in an effort to turn the airline around.
"With the plan looking for E1.5 billion in fresh equity, we think that unions will take comfort that the crisis is not severe enough to concede material pay cuts at this point," says Avery.
Prato has made it clear he wants to achieve a quick sale of the airline following the collapse of the government's recent auction. All bidders withdrew from the bidding process in July citing the stringency of Alitalia's pre-sale conditions. Citigroup, Alitalia's financial advisor, is now sounding out interested parties to see if they would listen if approached by Alitalia with an "interesting offer".
Companies approached include Air France-KLM, which holds a 2% stake in Alitalia, and original bidders Texas Pacific Group (TPG), Aeroflot and Air One. Air France-KLM chief executive Jean-Cyril Spinetta says: "If Alitalia wanted to speak with us we would listen carefully but it's too early to say what we'll do."
Source: Airline Business
