5 questions hanging over Italy’s new airline
ITA takes over from Alitalia but shares many of its predecessor's problems.
Italy’s new flag carrier ITA took its maiden flight Friday, following Thursday’s final landing of its bankrupt predecessor Alitalia.
While the brand of Italia Trasporto Aereo, its financing, route structure and approval from Brussels are settled, there are still a lot of unanswered questions looming over the new carrier.
1. What’s its name?
“ITA Airways” is painted on the side of the airliners, and they’re decorated with Italy’s tricolor flag on the tail. The historic Alitalia brand, with its 1970s chic, was sold to ITA at the last minute for just €90 million (a bargain compared to the initial asking price of €290 million), but ITA’s jets won’t be emblazoned with that livery.
The decision to use the name ITA Airways comes from “listening to people,” the company said.
ITA retains the right to use the Alitalia brand in the future if it wants to, and the old website redirects to the new carrier. The sale also means the Alitalia brand can’t be bought by a rival — something Ryanair, which is a big player on the Italian market, mischievously said it might try to do.
2. Will it be able to compete?
Many of the external conditions that saw Alitalia falter haven’t changed.
Low-cost airlines, long a powerful presence on the Italian market, have done better than their older rivals in the pandemic and picked up several airport slots from Alitalia.
Italian high-speed rail also helped undermine Alitalia’s business model. This time, ITA is eyeing partnerships with rail operators for combined rail-and-fly tickets. It’s a move made by several former flag carriers as they look to offer something different to no-frills rivals.
ITA CEO Fabio Lazzerini said it’s a “necessity” for both his airline and the state railways Ferrovie dello Stato to get a competitive advantage over low-costs.
The global aviation industry is only slowly recovering from COVID; IATA, the global industry lobby, expects net losses of $20.9 billion for European airlines this year and $9.2 billion in 2022.
The long-haul market suffered the most during the pandemic but, with the United States removing its travel ban on Europeans on November 8, ITA’s arrival on the market comes at a time when such lucrative routes might revive.
Alitalia lost a fortune no matter the broader economic environment, but ITA has made moves to become more efficient — much to the fury of unions. It has drastically slimmed down its workforce and provided its employees with a contract unions say is significantly worse than under Alitalia.
3. Will it join an alliance?
Lazzerini said last year that an alliance is “fundamental” to his company’s future, saying: “The world of airlines is made up of alliances. It is difficult to be alone.”
Alitalia was a member of the SkyTeam alliance along with Air France-KLM and Delta, but this was one asset ITA didn’t inherit from its predecessor. The new airline will have to bid to take part but could also switch to the rival Star Alliance, which includes Lufthansa, Tap Air and Air Canada.
“Activities are underway to identify a long-term strategic partner,” said Deputy Economy Minister Laura Castelli.
Getting into bed with some partners is crucial for ITA’s success, given the company starts life with only 52 jets. ITA’s chairman Alfredo Altavilla said the airline is giving itself a year to make a deal.
4. Will it cost the Italian taxpayer more money?
The new company starts life with €1.35 billion of fresh money injected from Rome, and it hopes to make better use of that cash than Alitalia, which burned through multiple expensive rescues before going bust.
The early days will be difficult. ITA is expected to lose €1.9 million a day during its startup phase, according to Corriere della Sera, which had a look at the airlines’ financial plans.
Next year, when the airline is supposed to expand its fleet by 50 percent and add 1,000 more hires (although still keeping its payroll well below Alitalia’s), the carrier plans to lose €267 million. It’s hoping to cut losses to €33 million by 2023 before making profits of over €100 million in 2024 and more than €200 million in 2025.
Lazzerini has tried to calm worries about the sense of investing in an Italian airline by pointing to other corners of the country’s aviation industry that benefit from state cash. He called out smaller airports that receive state support and play host to discount carriers that “open in June with the ribbon-cutting with the president of the airport and the region, leave in September, return in June to the same ceremony.”
5. Will it survive?
Rivals don’t hold out a great deal of hope for ITA.
Wizz Air CEO József Váradi predicted earlier this week that the airline would go “badly, as all the other Italian carriers before.”
The government is hoping he’s wrong. Castelli said the company “must produce value over time and become profitable.”
One way of keeping ITA afloat would be selling it to a big airline group.
But ITA isn’t the only small national carrier that might make a tempting morsel for a larger carrier. Then there’s the tricky political question for the Italian government of selling off a majority stake its new crown jewel to foreigners — something that never happened to Alitalia despite its many travails.
Pietro Lombardi and Giorgio Leali contributed reporting.
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