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.
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.
Alitalia's new uniforms. But what's with the gardening gloves?
[1] Disclosure: W&D's favourite airline.