Tom Gill ROME
Inheriting a disastrous financial state of affairs, Alitalia's chief executive Francesco Mengozzi is making a bid to restructure the airline group but has yet to come up with a crucial alliance deal.
The flow of bad news out of Rome was capped in April when Alitalia confirmed its year-end results. Debts surged to L1,467 billion ($677 million), rising by more than L1,000 billion over the year. The group's net loss stood at L495 billion turning around a modest L12 billion profit for 1999.
The carrier blamed the losses largely on the failed alliance with KLM and the problems with starting up its northern Italian Milan Malpensa hub, but with operating losses expected to continue in 2001, albeit at a more contained level than last year, Mengozzi knows the time for excuses is long gone.
To cut losses and boost profitability, the airline's new chief has split the company into five separate operational profit centres: air transport, including Alitalia mainline, Alitalia Team and Alitalia Express; leisure, including Eurofly; cargo; engineering and maintenance; and airports. This bid to increase transparency has been accompanied by a promise to sell-off any parts of the business that are clearly failing to add value. "It is clear that activities that do not work properly will be disposed of," said Mengozzi in a meeting with company managers in early April.
Internally promoted managers have largely been assigned to run the five business units. A replacement for the number two post, which has arisen from the resignation of Giovanni Sebastiani in March, has been found in the shape of Paolo Ceschia, understood to have been poached, like Mengozzi himself, from Italy's state railways. Ceschia will combine finance and strategy portfolios.
Despite his efforts to get the airline back into financial shape, Mengozzi has stressed that without a major alliance under its belt, Alitalia will remain hemmed in by "increasingly better organised and aggressive" competition. Indeed, at home the global alliances, aided by local allies, are closing in. In late March the Lufthansa affiliate Air Dolomiti obtained slots at Milan Linate airport, a rival to the Italian flag carrier's Milan Malpensa hub, to feed twice and three times daily business traffic into Vienna and Berlin, respectively.
Star Alliance's encroachment onto Alitalia's home ground will grow with Air Dolomiti's planned network expansion to Turin and Verona. SkyTeam, meanwhile, has its finger in the Italian pie with start-up Gandalf Airlines. The regional airline added more routes to its codeshare deal with the French carrier in March.
Despite renewing contacts with KLM, holding talks with Air France and refusing to rule out a tie-up with troubled Swissair, Alitalia has yet to seal an alliance. But it hints there may be some news by a shareholders' meeting set for the end of May. Government officials have said that a deal with Air France is close, but Alitalia emphasises it it talking to more than one carrier.
Source: Airline Business
