Alitalia has announced an upbeat two-year strategic plan, but in the short term it could be in for a bumpy ride.
The Italian carrier forecasts a drop in net consolidated profit from 1998's L408 billion ($223 million)to L202 billion this year, blaming declining domestic yields and a rise in fuel prices. The particularly bad first-half performance, which saw passenger numbers decline by 3% and revenue slump by 5%, is down to the Kosovo conflict and teething problems at its Malpensa hub, it says.
However, the flag carrier predicts a recovery to 1998 profitability levels next year and an even better L610 billion profit in 2001. Such heights, says Alitalia, will be achieved by boosting market share at Milan Malpensa by 10%, passenger revenues by 4%, cargo revenues by 8%, and trimming 3% from operating costs and 2% from the salary bill. Breakeven load factors will thereafter be 63%, compared with the current 64%.
These improvements will be a direct spin-off from its commercial alliance and merger with KLM, says the company, which will see the two companies sharing profits - for amounts in excess of $470 million during the initial period of November 1999 to March 2001 - on a 50:50 basis. The aim is to recapture some of the high-yielding northern Italian market from Zurich and Frankfurt.
Swissair and Lufthansa saw their passenger numbers increase by 14% and 9% respectively on the half year. Lufthansa has since moved to consolidate its position in Italy via a 26% equity stake in long term partner airline Air Dolomiti. Swissair, which enjoys a similar relationship with Malpensa-based Air Europe is also on course to reap rich rewards from its investment.
Air Europe does not seem to have suffered from the fall-out from Kosovo, anticipating ending 1999 with a 45% revenue increase and 53% more passengers carried. Two new Boeing 777-200s will strengthen its long-distance scheduled and charter operations, while its six domestically deployed Airbus A320s are on course to achieve a 45% load factor, up from 21%, by the end of the year.
After a slow start, domestic rival Air One has also begun to expand its own operations, inaugurating five return flights daily between Turin and Rome, as well as additional services beyond the capital to Naples and Bari. Low-cost start-up Zero Airlines expects to begin operations on domestic routes early next year with four Boeing 737s, with plans to expand into Europe.
With British Airways also on the verge of joining the fray with an Italian subsidiary or franchise, Alitalia will need to be vigilant.
Source: Airline Business
