Alitalia's financial difficulties

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Old Oct 22, 07, 10:18 am
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Lightbulb Alitalia's financial difficulties

The reasons of Alitalia's difficulties are well known, but nobody in Italy seems to tackle with the problem (and that is why foreign investors are so reluctant in investing in the Company):
- 3 hubs, where only one is needed. But politicians do not want to see Rome just being a destination rather than a hub
- Some domestic lines are not profitable, but MPs do not want to see these lines closed, in the name of Public service and prestige (but they do not want to pay for this service)
- Only a few long haul flights are profitable: Alitalia needs to stay focused on Mediterranean flights, where the demand is high and the competition rather limited. Alitalia dreams to be AF, but should be profitable only by being a good regional company, as CSA or Austrian Airlines are.
- Poor skills in yield management, so that occupancy rate is much lower than AF. Today, Alitalia is not a winner in the Skyteam alliance (the market shares of Alitalia’s allied companies – and competitors – are generally much better in code share flights)
- Poor productivity and numerous people for ground operations, well known for their inefficiency and total disorganisation. Trade unions are still very powerful at Alitalia, which is a difficulty to help the company to move forward
- Very low quality of service on board and for ground operations (but this is not the number one problem, even if, as a customer, anyone can see this issue: Alitalia will not gain market shares and be profitable only by improving the quality of service)
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Old Oct 22, 07, 10:23 am
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Originally Posted by nicolas75 View Post
- 3 hubs, where only one is needed. But politicians do not want to see Rome just being a destination rather than a hub
- Only a few long haul flights are profitable: Alitalia needs to stay focused on Mediterranean flights, where the demand is high and the competition rather limited. Alitalia dreams to be AF, but should be profitable only by being a good regional company, as CSA or Austrian Airlines are.
- Poor productivity and numerous people for ground operations, well known for their inefficiency and total disorganisation. Trade unions are still very powerful at Alitalia, which is a difficulty to help the company to move forward
They are slowing going to "fix" that but they say the focus is going to FCO not at Milan other than a few longhauls. Time will tell if it was the right call. Many of say no.
Yes Alitalia should stay focused on the more profitable routes as you say both in the Med and long haul.
The ground ops and mx issues and such you mention above are the worst in my opinion. It is causing constant fall out.

Ciao,
FH
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Old Oct 22, 07, 11:21 am
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Originally Posted by nicolas75 View Post
The reasons of Alitalia's difficulties are well known, but nobody in Italy seems to tackle with the problem (and that is why foreign investors are so reluctant in investing in the Company):
- 3 hubs, where only one is needed. But politicians do not want to see Rome just being a destination rather than a hub
Hello
Which is the third hub?!

BTW, probably u miss the fact if you want to sell AZ (and i hope to see AZ failed or - at least - sold) u have to make to attractive. Do you think AF and LH would find attractive a carrier whose hub is so close to theirs?

It's a logical choice - NOW - to focus on FCO, because the industrial plan has only one goal: to sell AZ to other groups.


- Some domestic lines are not profitable, but MPs do not want to see these lines closed, in the name of Public service and prestige (but they do not want to pay for this service)
...
- Only a few long haul flights are profitable: Alitalia needs to stay focused on Mediterranean flights, where the demand is high and the competition rather limited. Alitalia dreams to be AF, but should be profitable only by being a good regional company, as CSA or Austrian Airlines are.
- Poor productivity and numerous people for ground operations, well known for their inefficiency and total disorganisation. Trade unions are still very powerful at Alitalia, which is a difficulty to help the company to move forward
- Very low quality of service on board and for ground operations (but this is not the number one problem, even if, as a customer, anyone can see this issue: Alitalia will not gain market shares and be profitable only by improving the quality of service)
Here u are definitely right.

BTW the main problem about AZ is that no one in Italy seems able to consider it a normal enterprise in a free market.
We still keep to use a 70s' way of thinking
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Old Oct 22, 07, 11:24 am
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Originally Posted by FlyingHoustonian View Post
They are slowing going to "fix" that but they say the focus is going to FCO not at Milan other than a few longhauls. Time will tell if it was the right call. Many of say no.
Milan or Rome? .... Rome or Milan?
It depends on the perspective. Only one thing is sure: to focus on Rome only or on Milan only is far better than trying to stay in 2 places as AZ did in the last year.

So the choice made is welcome.
Then, we can discuss if it was the best one. But - IMHO - it will be difficult to do worse than the past.
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Old Oct 22, 07, 11:53 am
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Vero ma....

The didn't make a full choice as they are leaving a few flights at MXP and some scattered domestic flights at LIN.

I agree they need to pick one and stick with it (and not screw southern Italy in the process). It seems MXP or LIN would be the best choice since Milan is where all the higher yielding business traffic is but I guess AZ thinks they could not focus tourists through Milan without losing market share to other airlines. The problem is they are already losing market share to other airlines. Not to mention the horrid maintainance on the MDs. My last 3 CTA-FCO and MXP flights were can'd or extremely delayed due to mx.

Ciao,
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Old Oct 22, 07, 9:26 pm
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*Flame suit on*

As someone born and raised in Italy, I feel I can provide a candid idea for Alitalia.

It needs to be shut down, so the trade union contracts are ended. Then, the next day, a new (private) owner can restart operations THEIR WAY, and not have to worry so much about the unions going on strike and the like. They can hire the best of the Alitalia crowd, and bring in some foreign management gurus to make the tough, but necessary decisions for the new company.

They need to standardize the fleet, and upgrade the premium cabins and lounges. That is almost as urgent as my next point.

The new owners need to pick the best hub for the business. Not two hubs, just one. Milan is where businesspeople want to go, but FCO is where most of the tourists want to go. The new company must decide whether they want to target business customers (which they would need new biz class for) or leisure travellers.

Up until now, the politicians have always known that Milan needs to be the hub for Alitalia. However, they want to satisfy those in the south of Italy, as well as have nonstop routes from the seat of government.

I know it will be a tough road, but AZ can not continue on the dead end road they are currently on.

Last edited by SEAUAKID; Oct 23, 07 at 8:38 am
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Old Oct 22, 07, 10:01 pm
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Even for leisure travellers, MXP makes more sense.

Most tourists come in on flights from the North (be it trans-Atlantic flights or flights from Northern Europe). A much smaller number come in from Africa or the Middle East.

Moreover, a lot of these tourist want to go to north Italy. Venice, Florence, and Verona/Garda are big attractions (and Milan a smaller one). Indeed, quite a few are heading to Ticino in southern Switzerland.

Someone who wants to go to Rome will not be too put out by having to connect in MXP -- at least he will not be backtracking. For those headed to Naples or Sicily, it makes no difference at all if he connects in FCO or MXP.

But for those heading to Northern cities, connecting in FCO makes it a much longer trip. I foresee many of these flying into AMS, CDG, ZRH, or FRA and connecting there -- costing AZ a very big segment of its business.
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Old Oct 23, 07, 1:50 am
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Originally Posted by SEAUAKID View Post
*Flame suit on*

As someone born and raised in Italy, I feel I can provide a candid idea for Alitalia.

It needs to be shut down, so the trade union contracts are ended. Then, the next day, a new (private) owner can restart operations THEIR WAY, and not have to worry so much about the unions going on strike and the like. They can hire the best of the Alitalia crowd, and bring in some foreign management gurus to make the tough, but necessary decisions for the new company.

They need to standardize the fleet, and upgrade the premium cabins and lounges. That is almost as urgent as my next point.

The new owners need to pick the best hub for the business. Not two hubs, just one. MXP is where businesspeople want to go, but FCO is where most of the tourists want to go. The new company must decide whether they want to target business customers (which they would need new biz class for) or leisure travellers.

Up until now, the politicians have always known that MXP needs to be the hub for Alitalia. However, they want to satisfy those in the south of Italy, as well as have nonstop routes from the seat of government.

I know it will be a tough road, but AZ can not continue on the dead end road they are currently on.
100% agree with u.
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Old Oct 23, 07, 1:53 am
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Originally Posted by Dovster View Post
Even for leisure travellers, MXP makes more sense.

Most tourists come in on flights from the North (be it trans-Atlantic flights or flights from Northern Europe). A much smaller number come in from Africa or the Middle East.

Moreover, a lot of these tourist want to go to north Italy. Venice, Florence, and Verona/Garda are big attractions (and Milan a smaller one). Indeed, quite a few are heading to Ticino in southern Switzerland.

Someone who wants to go to Rome will not be too put out by having to connect in MXP -- at least he will not be backtracking. For those headed to Naples or Sicily, it makes no difference at all if he connects in FCO or MXP.

But for those heading to Northern cities, connecting in FCO makes it a much longer trip. I foresee many of these flying into AMS, CDG, ZRH, or FRA and connecting there -- costing AZ a very big segment of its business.
With all the due respect, even if i live in Milan, i can grant u beyond any doubt that the turistic flow to Rome is far far far larger than all other flows 2gether.

And anyway u should consider that the choice made about Rome makes definitely more sense if u're seeking a bidder among LH or AF.

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Old Oct 23, 07, 4:06 am
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It's almost lunchtime- please do wake up and smell the coffee.
Very few people want to go to MXP. Even fewer among the highest-yield pax (i.e. those who pay €1000 for a European nonstop in C). They'd much rather fly into LIN. So the MXP hub both has weak o&d demand and loses AZ premium customers who want to fly from/to Milan.
Also from a yield perspective, FCO is seriously convenient for connectons to/from the very lucrative W. African routes. And longhaul connections from pretty much anywhere apart from NYC and Canada (e.g. I've tried NRT, EZE, CCS and MIA) involve minimal (if any) backtracking. Surely it makes AZ a less attractive choice if you wanted to, for example, fly LHR-MOW or BUD-LYS, but these flights are usually sold on the basis of price and frequency, so I feel that AZ management has for once made a good choice!

As for bringing in foreign "gurus", great idea...Just ask OA
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Old Oct 23, 07, 4:24 am
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Originally Posted by graraps View Post
It's almost lunchtime- please do wake up and smell the coffee.
Very few people want to go to MXP. Even fewer among the highest-yield pax (i.e. those who pay €1000 for a European nonstop in C). They'd much rather fly into LIN. So the MXP hub both has weak o&d demand and loses AZ premium customers who want to fly from/to Milan.
i'm one of those.

Let's be honest:

Domestic travel:
the longest flight is probably MIL-CTA (1h50min): why should i spend more than 50 mins to get to the airport (and about 11EUR +1 to reach MXP by train) if i'm lucky (because there's a train every 30 mins), when i can reach LIN in 20 mins by taxi, spending about 15/20 EUR?

European destination:
here i think the choice is strongly influenced by price and timings... so it's very difficult to establish a general rule. A case-by-case discussion could be more appropriate.

Longhaul (not direct connection):
Several destination are not served directly from MXP. So if i have to connect through another gateway, LIN is the logical choice since it's closer to city center.

Longhaul (direct connection):
if my destination is server through MXP, my personal choice is influenced by carrier: if SQ, TG or QR, MXP is ok for me. Any other option ( CO, DL, AZ and even EK) will bring me to fly BA to LHR and connecting onwards on BA. Notwithstanding the problem transit in LHR, being BA Gold, fast track is ok, LIN is close to city and i prefer to spend 50 mins transiting in London and flying BA (which is strongly better than CO DL AZ AA and similars) for the whole trip.
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Old Oct 23, 07, 4:25 am
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Originally Posted by graraps View Post
Very few people want to go to MXP. Even fewer among the highest-yield pax (i.e. those who pay €1000 for a European nonstop in C). They'd much rather fly into LIN.
That's not true. Most people flying into Italy for business purposes are heading to Milan, not Rome -- or if not Milan than at least one of the northern commercial areas. LIN couldn't even begin to handle that traffic.

As far as those who are forking out the big Euros for intra-European Biz, I can't imagine that there are too many of them taking AZ -- not when there is almost no difference between Biz and Economy on those flights.

Even on the 4 hour TLV-MXP route I would not pay $100 more to be in Biz -- not when the only benefit I get is that the middle seat is not assigned.

Keep in mind that JFK-MXP-FCO only takes longer than JFK-FCO because of the connection time. JFK-FCO-MXP is longer than the connection time plus the additional airtime both heading south to FCO and then back north to MXP.

Moreover, MXP is not only Milan's home airport, it is also the home airport for all of Ticino. Who is going to agree to fly FRA-FCO-MXP to get to Lugano? He might as well just drive there.
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Old Oct 23, 07, 4:38 am
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Originally Posted by Dovster View Post
That's not true. Most people flying into Italy for business purposes are heading to Milan, not Rome -- or if not Milan than at least one of the northern commercial areas. LIN couldn't even begin to handle that traffic. Moreover, MXP is not only Milan's home airport, it is also the home airport for all of Ticino. Who is going to agree to fly FRA-FCO-MXP to get to Lugano? He might as well just drive there.
There are quite a few flights to places like Bergamo and Lugano. Let's face it, AZ can't enjoy a great share of that traffic when all sorts of LCCs are competing for the smaller markets. Indeed (AFAIK) one could fly to Bergamo via FCO and be right next to their destination.

Originally Posted by Dovster View Post
As far as those who are forking out the big Euros for intra-European Biz, I can't imagine that there are too many of them taking AZ -- not when there is almost no difference between Biz and Economy on those flights.
Even on the 4 hour TLV-MXP route I would not pay $100 more to be in Biz --not when the only benefit I get is that the middle seat is not assigned.
But if the walk-up is €920 for Y, it's still a great yield!

Originally Posted by Dovster View Post
eep in mind that JFK-MXP-FCO only takes longer than JFK-FCO because of the connection time. JFK-FCO-MXP is longer than the connection time plus the additional airtime both heading south to FCO and then back north to MXP.
But that's only valid in the case of NYC (which is a thick enough route to warrant nonstop from MXP) and Canada. All other longhaul routes are better via FCO or similar distance and you recoup some of the lost time by connecting into LIN.
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Old Oct 23, 07, 4:59 am
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Originally Posted by Dovster View Post

Keep in mind that JFK-MXP-FCO only takes longer than JFK-FCO because of the connection time. JFK-FCO-MXP is longer than the connection time plus the additional airtime both heading south to FCO and then back north to MXP.
Who will be so crazy to fly JFK-FCO-MXP if he has business in milan? (in lugano is ok).
If i have business in MIL and i was routed via FCO, i would go definitely to LIN over MXP. More flights and closer to downtown...
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Old Oct 23, 07, 5:09 am
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Originally Posted by paffendorf View Post
Who will be so crazy to fly JFK-FCO-MXP if he has business in milan? (in lugano is ok).
If i have business in MIL and i was routed via FCO, i would go definitely to LIN over MXP. More flights and closer to downtown...
Fair enough -- but JFK-FCO-LIN is just as time-consuming in the air as JFK-FCO-MXP.

If I face either possibility I would take a different airline, connect somewhere in Northern Europe and continue on to Milan from there.
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