Italian leisure carrier Volare Airlines is starting the country's first home-grown low-cost operation and is talking to Alitalia about a possible partnership.
Europe's low-cost boom has clearly reached Italy. Ryanair has opened its first base in the country at Milan's Bergamo Airport; Volare's new offering Volareweb.com starts up on 30 March; and Alitalia is mulling its low-fare options.
According to Giulio de Metrio, managing director, air transport division at Alitalia, the growth of low-cost carriers to and from Italy has been "explosive". In the six months to May they will have increased their capacity by 50%, he points out, adding: "This summer it is expected that they will offer almost as many seats between Italy and western Europe as Alitalia".
The carrier does not want to ignore such growth, but the difficulty of achieving the labour costs needed to set up its own unit are daunting. "We are considering everything very carefully, and we are close to making final decisions," says de Metrio. "We can say that we are more oriented in joining an Italian partner for an external low-cost project rather than developing our own low-cost operations."
Its most likely partner is Volare, with whom it has an extensive codeshare relationship which started in mid-2002. The two sides have held preliminary talks on the low-cost market.
Whatever route Alitalia decides to take, Volare is transferring a significant portion of its scheduled operation to Volareweb.com. The services will be operated by a mix of seven Airbus A319/320s on international routes to Belgium, France, Germany Spain and the UK, as well on domestic routes from Bari, Milan Malpensa and its Venice home base. In its first year it will offer 2.3 million low-cost seats, and is aiming for load factors of nearly 60%.
Volare's move into the low-cost arena is partly defensive. "After the UK and Germany, Italy is probably the market with the highest potential for foreign low-cost airlines to penetrate," says Edgardo Badiali, Volare's commercial director. Since it is only a matter of time before foreign carriers start operating on Italy's domestic trunk routes, Volareweb.com will have a head start.
Badiali believes that Volare already has equal or lower costs than Ryanair, excluding the distribution side, and he cites this as another reason why it can make a success of the low-cost formula. If it does work well, next year the airline could transfer its entire scheduled operation to Volareweb.com, says Badiali.
Privately owned Air One is keeping a close watch on the low-cost battle, but is unlikely to transfer to this model, says Giorgio de Roni, director of Air One's passenger division. The Italian market is already characterised by fierce competition and price pressure, and there is huge over-capacity, he says.
Air One, which has an extensive codeshare with Lufthansa, saw its traffic soar by 91% to four million passengers in 2002. During the year it added 13 aircraft to reach a fleet of 27 Boeing 737s. It will concentrate on attracting the business market and improving service quality, says de Roni.
"We are pretty satisfied with our costs, the only area we must concentrate on is our distribution," he says. At present over 80% of Air One's sales are through travel agents, and it has cut its commission rate from 8% to 6%. It also seeks to boost direct sales, mainly through its call centre but also via the internet.
David Jarach, professor of air transport marketing at SDA Bocconi University in Milan, believes there will be more Italian low-cost start-ups. But according to Volare's Badiali, the market will only sustain a maximum of two Italian-based operators.
MARK PILLING LONDON
Source: Airline Business
