Kevin O'Toole/LONDON Andrea Spinelli/Rome
After a decade of losses, Alitalia has turned in a net profit of L163 billion ($92 million) for the first half of the year. Chief executive Domineco Cempella promises better to come, raising the prospect of early privatisation of the state-owned Italian flag carrier.
Although a large chunk of the result came from extraordinary gains, it marks a strong turnaround from the L310 billion losses posted a year ago. Turnover for the period stood at L4,000 billion.
Cempella adds that the airline is now certain to show profits for the year and that 1998 should be "even better" as the restructuring plan begins to gain momentum.
At the heart of the changes has been the creation of the Alitalia Team subsidiary, which has brought in new working practices and increased levels of efficiency across 40%of the business. The improvement includes an 11% rise in aircraft use, while passenger numbers grew by 6.9% - despite an overall cut in capacity during the year, including 15 aircraft (Fokker 70s and Airbus A300s) - helping load factors rise above 70%.
The restructuring plan, agreed with unions in mid-1996, is also starting to have an impact on costs, with the airline's labour bill falling sharply, by 12%. Sales grew by 8%, to above L4,000 billion, despite a 5% fall in passenger yields.
Cempella joined Alitalia in March 1996 as part of a new top-management team after the airline's 86.4% majority shareholder, the giant IRI state-owned holding company, was obliged to inject around L1,000 billion in 1996 and a further L840 billion in August to keep the carrier afloat. That has since been increased to L2,000 billion, following the state-aid deal struck with the European Commission (EC) in mid-year. Further tranches of L500 billion and L250 billion are due in early 1998 and 1999, although efforts to interest private investors in taking some of the load are under way in the hope of softening the EC's restrictions on capacity increases.
The IRI cash, together with gains from the sale of Alitalia's stakes in Aeroporti de Roma and the Galileo reservation system, has reduced debt to L1,000 billion from L3,600 billion in 1996.
Cempella says that Alitalia is preparing to dispose of its opulent headquarters building on the outskirts of Rome, to return closer to the airport. The next restructuring phase will also see the group divided into a series of standalone business centres in areas such as maintenance, cargo handling and information technology. "We're looking at whether we can be a leader in these businesses," says Cempella.
The next stage is to move towards privatisation "as soon as possible", says Cempella, hinting that it could be within two years if performance continues to improve. IRI has already begun a series of sell-offs under Government instructions that its holdings should be privatised within three years.
Cempella says that management and unions are convinced that privatisation is essential to secure the airline's long-term survival. He adds that the preference is for a flotation rather than a sale to an airline partner.
Source: Flight International
