Within the ups and many downs of the Italian airline market, one of the few certainties has been the lucrative Milan Linate-Rome Fiumicino.
Traditionally Italy's busiest route, the downtown location of Milan's Linate airport sealed the popularity of the connection for business traffic, while the cap on movements at the airport kept the route in the hands of an exclusive club. However, in a further sign of the changes seen in the Italian airline market, even that route has lost some of its sheen. Rome-Catania has taken over from the venerable route as the busiest domestic connection in Italy.
David Jarach, air transport marketing professor at Milan's SDA Bocconi School of Management, and managing partner at consultancy DiciotteFebbraio, points to the effects the country's expanding high-speed rail network is having on the air travel market.
Alitalia - which was initially allowed to operate the key route as a monopoly, after its merger with the other principle carrier on the route, Air One, in 2009 - has cut capacity on the route by about 10% over the last 12 months.
"This means a radical change for Alitalia, as its traditional cash-cow route is shrinking," Jarach says. He believes high-speed rail companies will become one of the Italian carrier's key competitors in the coming years - but rail firms are not alone in muscling in on Italian airspace.
European low-cost carriers, particularly short-haul giants EasyJet and Ryanair, have made hay within the fragmented Italian market, leaving the country's native carriers seemingly powerless to stop their expansion. Ryanair is the biggest carrier by capacity on Italian short-haul routes into Europe, while EasyJet is the third biggest. Their presence is also felt on domestic routes as well, where Ryanair and EasyJet ranked second and fourth largest by capacity in September.
Jarach argues that much of the Italian domestic market, in particular the key north-south routes - with a mix of ethnic and visual flight rules traffic - makes it ideally suited to low-cost operators.
Small wonder then that the likes of EasyJet and Ryanair continue to expand in Italy, especially given that higher tax burdens in the UK and Germany has encourage them to expand elsewhere in Europe. Ryanair, for example, has increased Italy-Europe capacity by 14%, and domestic capacity is up nearly a third on last year.
At the other end of the spectrum, full-service carriers have continued to develop their presence in Italy.
While Lufthansa pulled the plug on its groundbreaking Lufthansa Italia concept - the Italian established airline unit based in Malpensa, where it matched up against EasyJet - the Star Alliance carrier remains active in the region through its Air Dolomiti brand.
Against this backdrop there have been a string of consolidation moves in Italy over the past couple of years, both through merger deals and the collapse of a number of small operators.
Italy's two biggest carriers - Alitalia and Air One - teamed to reinvent the national carrier - this time in the hands of private owners. Results have improved, but Jarach notes its load factors are still about five to six points below the Association of European Airlines average.
While its financial performance has improved, the new Alitalia continues to be loss-making at an operating level. It has also developed a hybrid model through Air One, which it calls a "smart carrier", to address Malpensa.
"It's working in terms of volume, but it only has five or six aircraft against 18 or 19 at EasyJet," says Jarach. "My feeling is Air One faces the same problem of scale as Lufthansa Italia, and it now has to make a decision to grow the base or take the hit."
Meridiana Fly meanwhile, having already embarked on a round of consolidation through its link-up with leisure carrier Eurofly, has now struck a deal to with leisure operator Air Italy.
The combination is aimed at establishing a strong Sardinian operation, and targets a financial turnaround - Meridiana Fly first half losses having increased to €69 million ($93 million) - with a combined revenue in excess of €800 million.
Source: Flight Daily News
