Wry & Dry

Why buy an airline? Alitalia sinks even more.

Why buy a company that hasn't made a profit in nearly 20 years?

Especially when the company (a) is an airline and (b) is Alitalia, Italy's flag-carrier.  Bloated by years of government indulgence, overpaid employees and restrictive work practices, Alitalia was the epitome of Italy's government/industry failures.  It's consumed over €10 billion of they-the-Italian-taxpayer's money. 

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The aircraft fly high...

For reason's unknown, Gulf carrier Etihad [1] three years ago spent €400m buying effective control of Alitalia.  But today it looks like a doomed strategy.  In 2016 Alitalia had fewer passengers than when Etihad entered in 2014.  As carrying passengers is a useful way for airlines to make a profit, the decrease in passengers hasn't helped the airline's bottom line:


...the profits fly low.

Alitalia's problems are many.  It's getting flogged on the 70% of its routes that are dominated by cheap, no-frills airlines.  Budget airlines have budget airline expenses.  But Alitalia doesn't have budget expenses.  So it cannot compete on 70% of its routes.  Readers can join the dots.

And its long-haul flight opportunities are hamstrung by legacy tie-ups with Delta and Air France.  And it's got restrictive work practices.

Etihad's solution? Alitalia will become a low-cost airline on flights within Europe but remain a 'full-service carrier' on international routes.  And cut costs by €1bn over the next three years.  The former is possible, the latter the stuff of dreams.

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Alitalia's new uniforms.  But what's with the gardening gloves?

[1]  Disclosure: W&D's favourite airline.