Milan Malpensa Airport

Alitalia battles for survival in 2013, again, despite operational improvements

In 2012 Alitalia lost EUR280 million, bringing its cumulative net loss to EUR843 million since the ‘new Alitalia’ was created in 2009. In Feb-2013, with its cash reserves almost evaporated, it had to ask its shareholders for a EUR150 million loan to fund its operations. Following the 2012 results announcement, CEO Andrea Ragnetti resigned his position after only a year with the company. A permanent replacement is being sought while chairman Roberto Colaninno takes the controls on an interim basis.

Since 2009, there have been operational improvements, leading to rising load factors and much improved on-time performance, and a major fleet replacement and renovation programme. Unfortunately, these positive developments have not set Alitalia on the path to financial health. Moreover, while its cost base is fairly competitive against full service network carriers, it remains very high cost compared with the short-haul point-to-point LCCs with whom it increasingly competes. Alitalia looks strategically isolated between these two sets of competitors and it now seems unlikely that Air France-KLM will throw it the once anticipated life vest. Loss-making, bleeding cash and currently leaderless, Alitalia faces a battle for survival in 2013.

US carriers to slash fourth quarter trans-Atlantic capacity as Europe's outlook dims

Increasing economic uncertainty in Europe has resulted in US carriers pulling back capacity to the continent later this year to proactively contain losses and a drop-off in traffic that could result from the increasing likelihood of Greece’s exit from the euro zone and the Euro falling to a two-year low against the US dollar. Delta has already stated its goal to reduce capacity 5% across the Atlantic during the fourth quarter, while United has already instituted schedule changes that show a pull-down in secondary European markets. US Airways, which during the last year has enjoyed marked success in its trans-Atlantic business segment, has not declared any plans regarding its capacity to Europe later in the year. But the carrier is launching several seasonal services on the back of its strong performance in the European market.

Trade group Airlines for America (A4A) estimates that during the fourth quarter of this year US carriers will reduce their capacity to Europe by 7.8% as they attempt to better manage seasonality and stave off effects of a recession on the continent. This change is significant as Western Europe is still the largest international market from the US.

Milan Malpensa is trying to gel low-cost and full service to rebuild its lost glory

Milan Malpensa Airport is betting on low-cost carriers as well as full service carriers to restore its lost glory but it will not be able to rebuild a hub owing to its lack of a local network carrier. LCCs now represent about 50% of total seat capacity at the airport while Alitalia accounts for only 4% of capacity as it has shrunk its Milan network to only seven routes, according to data from Innovata. Including its LCC subsidiary Air One Smart Carrier, Alitalia offers less than 13% of Malpensa’s total seat capacity, which is not sufficient to fulfil a possible hub operator role. Most noteworthy is the decline of Malpensa as a transatlantic gateway.

Malpensa used to be a thriving Alitalia hub with the airline serving over 80 routes from the North Italian airport, including 10 transatlantic routes. But the Italian flag carrier’s bankruptcy at the end 2008 and its restructuring under new private ownership from 2009 changed its fortunes. Alitalia now only operates two transatlantic routes from Malpensa while US carriers have also dropped several routes to Milan in recent years.

Air Malta troubles worsen as unions flex muscle and LCCs grow

Air Malta’s troubles have become more acute as the struggling carrier’s unions increase their opposition to large-scale redundancies. Prime Minister Lawrence Gonzi has stated the present situation is increasingly worrying, particularly in light of the EUR77 million the government has poured into the airline since Jun-2011.