AZ to end AF/KL partnership from january 2017

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Old May 20, 15, 12:51 am
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Unhappy AZ to end AF/KL partnership from january 2017

News of the day
http://www.ft.com/intl/fastft/325692...lm-partnership

Not an unlogical move knowing the new shareholder of AZ, but there is not too much details in this article. I understand it will be the end of the JV for flights between Italy and France (don't know if it was covering also the Netherlands). It doesn't necessarily mean the end of the code-share agreement. For sure,mint doesn't concern the North Atlantic JV as the end of the current agreement is much later. But will AZ stay in Skyteam ?
Any thoughts guys ?
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Old May 20, 15, 1:08 am
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Ending agreements with AFKL does not mean that they will leave the SkyTeam alliance, but it is sad to see such agreements end.

Hopefully (for me ), AF will maintain their code share agreements on most Alitalia domestic routes to be able to reach half of my family
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Old May 20, 15, 1:10 am
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Their Skyteam membership doesn't have an expiry date, as that 2009 deal did.

So there is no reason to expect that this news - which is merely the passive act of allowing a deal to expire at the end of the agreed timeframe - will lead to something as active as withdrawing from Skyteam.

I would imagine that the customer flows from Skyteam are a vital requirement for Alitalia's ongoing survival.
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Old May 20, 15, 2:36 am
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The story of yet another AFKL failure. The airline was in pole position from the start but neither read the situation accurately nor was able to propose a solution that would turn AZ into a healthier and leaner airline whilst being acceptable by the Italians. The AZ plan was atrocious and AF was right to refuse it, but AF's own proposed counter plan was bad too and someone else offered much better.

Note that the plan is about JV AND partnership, which probably means some of the codeshare agreements on long haul whereby AZ effectively feeds AF long haul flights outside of the TATL JV. This could be an important income loss for AF.

There will now be discussions to see if something gets salvaged or not but I personally do not believe that AZ will leave Skyteam.
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Old May 20, 15, 2:51 am
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Originally Posted by orbitmic View Post
The story of yet another AFKL failure. The airline was in pole position from the start but neither read the situation accurately nor was able to propose a solution that would turn AZ into a healthier and leaner airline whilst being acceptable by the Italians.
With due respect, this looks to me as if your vision is skewed by looking through a pair of "AF can do no good" glasses.

What exactly is that "solution that would turn AZ into a healthier and leaner airline whilst being acceptable by the Italians"? Should AF have done what EY is doing? Should AF have offered to poor gazillions of Euros into AZ and hope for the best?

If there was an easy solution to the AZ problem, how come that BA or LH did not come rushing to the door and snap it from AF's or EY's hands? Some problems have no good solution and the least bad is sometimes to let go and turn away. AF may have many flaws but it is not a sufficient reason to hold them accountable for not being able to do miracles.
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Old May 20, 15, 3:42 am
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Yes its true that AF could not have saved AZ but they did pour some money into AZ and in return got what Cassano calls a favourable agreement. And he is now upset about it. But AF effectively paid for that agreement and with AZ indeed turning things around thanks to EY it appears to have been a smart move by AF. At least they will be able to milk this favourable agreement for a few years before it expires.
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Old May 20, 15, 3:43 am
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AF is lost, hence they asked some industry experts to take a look at options and present various scenarios for the future for the Group. I fear MOL already made fun of one of the options recently in an interview with a French paper.

This is a great step forward from people within AF who did not lose the sense of reality. AF is running out of time and should have options for the future, aside from the old one, asking the tax payer for help.

More than 15 years ago, Alitalia was also an option for KLM, because Pieter Bouw was smart enough to understand the future for a carrier the size of KLM. Alcazar did not happen, so in the process carriers like Lufthansa and Air France benefitted from it and they were simply given time to develop their options

Later that decade Alitalia became an option again and the beautiful Italian bride was able to lure the Dutch very close to their spider web called Malpensa. Fortunately, the Dutch realized the trap and only lost some 1XX million in the process, otherwise I fear both would have been dead by now or the respective tax payers would have bailed them out. ( in the NL they seem to be realistic about the future and bailouts judging from Fokker and Lelystad Museum...)

More importantly; Alitalia, Italy and Malpensa is not what it used to be. Italian domestic traffic used to be highly lucrative, now we have high speed rail and low cost competition, Malpensa turned out to be an airport from the 1970's and not the late 1990's and Linate is still operating, so Alitalia is really only an option for carriers with deep pockets trying to buy influence in the EU, aka Etihad or Qatar.

Nevertheless, the feeder traffic fed into AMS and CDG should not be underestimated, we all know that the feeder slaves within Europe are not really making money, so it will be interesting to see how AF/KL manage to connect a major European market to their networks.

KLM already lost a major feeder once, when LH purchased Eurowings and needed years to recover (KLM Alps was not that important)

Under the bottom line, another issue for the KL/AF, which they really do not need to have on their desks right now...
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Old May 20, 15, 5:12 am
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The agreement expires in 1.5 years and it seems that no one doubts that it is more favorable to AFKL (feeder flights for AFKL longhauls) than to AZ. And it is hard to see how that fits with the strategic plan of EY (good luck to them with AZ).

In the meanwhile several things can happen.
Within the current agreement AZ might be able able to make bookings on AFKL more difficult/expensive. I am not sure how, but such contracts always allow some leeway. On the other hand, this could be negotiating tactics by AZ to obtain more favorable terms. Future will tell.

The JV DL-AFKL-AZ is another story. Supposedly it ends in 2022. But there are probably all kinds of opt-out clauses.

Last edited by brunos; May 20, 15 at 5:17 am
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Old May 20, 15, 5:35 am
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Originally Posted by brunos View Post
The JV DL-AFKL-AZ is another story. Supposedly it ends in 2022. But there are probably all kinds of opt-out clauses.
And, apparently, very expensive ones.

G
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Old May 20, 15, 5:53 am
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Originally Posted by AlicorporateUK View Post
And, apparently, very expensive ones.
We do not know. We can easily imagine that the DL-AF-KL-AZ JV is much more profitable to all airlines than the AFKL deal they had for France and Netherlands.
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Old May 20, 15, 7:53 am
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Originally Posted by olivedel View Post
We do not know. We can easily imagine that the DL-AF-KL-AZ JV is much more profitable to all airlines than the AFKL deal they had for France and Netherlands.
All big US airlines and alliances have a TATL JV now, so it is a must rather than a big overall benefit.
Within each alliance, there is the question of who gains more.
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Old May 20, 15, 8:07 am
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Originally Posted by brunos View Post
Within each alliance, there is the question of who gains more.
Well that's an easy answer. Whomever has the most leverage gains more. As AF did in this particular deal.
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Old May 20, 15, 8:17 am
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Originally Posted by stimpy View Post
Well that's an easy answer. Whomever has the most leverage gains more. As AF did in this particular deal.
I was referring to the transatlantic Joint venture with Delta, AFKL and AZ.
That is different from the partnership/JV solely between AFKL and AZ signed when AFKL was a major shareholder of AZ. But I am not privy to those confidential contracts.
The press report is very short. It is unclear whether it only targets the agreement between AFKL and AZ or whether it also lead to a withdrawal of AZ from the JV with DL.
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Old May 20, 15, 8:28 am
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Originally Posted by brunos View Post
The press report is very short. It is unclear whether it only targets the agreement between AFKL and AZ or whether it also lead to a withdrawal of AZ from the JV with DL.
The news report on the KLM website announcing Alitalia's entry into the TATL joint venture does seem to date it around the same time as this reported "agreement" with AFKL.

Therefore - it is perhaps likely that Alitalia is preparing to exit the TATL JV, too.

This would probably have been inevitable if, as is possible, Etihad wishes to ramp up service to the US, using Alitalia to operate services from Europe to the United States, in co-operation with feeder flights from Etihad themselves, and from airberlin/Etihad Regional.
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Old May 20, 15, 12:32 pm
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Originally Posted by irishguy28 View Post

This would probably have been inevitable if, as is possible, Etihad wishes to ramp up service to the US, using Alitalia to operate services from Europe to the United States, in co-operation with feeder flights from Etihad themselves, and from airberlin/Etihad Regional.
Will be interesting to see Etihad's reaction to the new challenges in Germany (for those not familiar with the situation, it looks like they cannot use Air Berlin as a feeder slave to Abu Dhabi as they intended to do... making AB obsolete for them...)

Without any doubt, there is demand between Italy and the US, good old Clark called the Italian market 'underserved' from the US trying to justify his 7/7 service between Milan and New York.

So far, AZ fed a lot of passengers into CDG, especially to LAX the number used to be amazingly high, actually high enough to try nonstop service on their metal some years ago. IIRC, it used a three digit number daily just to LAX through MXP and CDG.
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