THE ARRIVAL OF several new low-cost carriers in Italy has prompted flag carrier Alitalia to join the fares war on domestic routes by offering ultra-low prices on some flights.
The move, which cuts one-way weekend fares to all destinations to just L99,000 ($66), and to L65,000 on several short-range routes from Rome, has resulted in complaints from the new carriers. Italy's anti-trust authority is now evaluating claims that the fares are set below costs and is studying anti-competitive practices said to have been introduced against Air One (formerly Aliadriatica) on the lucrative Rome-Milan route. It will rule on the outcome on 11 November.
Privately owned Italian airlines have been successful in eroding significantly Alitalia's share of the domestic market, but they insist that the flag carrier is taking advantage of Government funding to reduce fares artificially. They claim that the airline received L1,000 billion in July without prior approval from the European Commission, which it is using to subsidise fares, adding that Alitalia still controls slots at many airports.
One carrier which has suffered as a result of Alitalia's low-fares policy is Rome-based Noman, which has been forced to cut back the number of flights it operates, and is looking for new funding partners.
The low-cost airline, which has a capital of L1.9 billion, operates two McDonnell Douglas DC-9-15s on domestic routes.
The 1997 Italian budget, now going through parliament, includes a request for L1,500 billion of fresh capital for Alitalia. The cash, which is half of the L3,000 billion promised to the carrier, has been requested by IRI, the giant state-holding company which owns Alitalia, and will be paid in installments over three years between 1997 and 1999. IRI paid L1,000 billion in July to keep the carrier afloat, with the remaining L500 billion to be raised through asset sales. The European Commission is now investigating the state-aid package.
Source: Flight International
