Alitalia is squaring up to its impending scrutiny by the European Commission with the launch of its low-cost operation, Alitalia Team. But the carrier remains dogged by allegations of predatory pricing and collusion on slots.
Brussels opened an investigation into the airline's planned 3,000 billion lire (US$2 billion) capital injection from the state holding company IRI on 9 October and is scheduled to rule by the end of the year whether it meets current state aid guidelines.
Alitalia Team is scheduled for launch before the end of the year but in contrast to other low-cost spinoffs in Europe will initially focus on European and intercontinental rather than domestic services.
Giorgio Scoppetta of Alitalia's ground and cabin crew union, FIT, claims that Alitalia will transfer a fleet of 12 A321s to Alitalia Team for European flights, plus eight B767-300ERs for intercontinental flights (see feature p24). The carrier is set to operate at costs that are 50-60 per cent lower than those of its parent company, maintains Lamberto Contigliozzi of Alitalia's main flight attendants' union, Sulta.
Alitalia continues to face pressure in its domestic markets from a host of startups and Contigliozzi expects Alitalia Team to merge with Alitalia's regional subsidiary, Avianova within two years. Alitalia's restructuring plan says its costs are 12 per cent above those of new entrants.
One competitive irritant looks set to disappear, however, with a planned codeshare with one of the new entrants, Alpi Eagles, from 27 October. Alpi operates four Fokker 100s and will integrate Alitalia's five Fokker 70s to take over a 'significant' proportion of Alitalia's international and domestic frequencies. This would free capacity for Alitalia and help appease its shortage of aircraft. Alpi Eagles would operate independently and not develop into an Alitalia franchisee.
The deal would be 'an efficient tool that would help Alitalia counter competition', set to be exacerbated by the onset of domestic cabotage in April 1997, says Alpi Eagles' commercial director Michael Harrington, former head of network development at Alitalia. The agreement could help win back passengers which Alitalia lost from the north of Italy.
Alitalia is slashing all domestic fares under its 'Autumn Campaign' between 1 October and 15 December 1996 from a standard single fare of 321,000 lire (US$211) to 139,000 lire for off-peak weekday services and 99,000 lire at the weekends, while short-haul services, such as Rome-Naples, have dropped to 69,000 lire. The 99,000 lire fare brought Alitalia a 66 per cent increase in sales on the previous year, when it was tried in August, says Alitalia.
The commercial rewards brought by the low fare may be curtailed, however, by likely accusations of predatory pricing. The fares are clearly below Alitalia's operating costs, asserts one aviation consultant. 'Alitalia needs to offer a 115,000 lire fare at 100 per cent load factor, using a standard 163-seater MD-80, just to cover operating costs.' As Alitalia is state-owned, the low fares also raise legal questions as the prices compete with those offered by railways.
In the meantime, the Italian antitrust authority is investigating allegations that Alitalia has colluded with airport slot coordination committees made up of Alitalia staff. Italian press reports suggest coordinators have handed airlines' slot requests over to Alitalia to the extent that information on competitors became a part of Alitalia's marketing strategy. The antitrust authorities will rule on 11 November.
Lois Jones
Source: Airline Business
