How Alitalia Is Running On Fumes


When the first Alitalia airplane took off in 1947, nobody was expecting such a turbulent story

When the first Alitalia airplane from Turin to Rome took off on May 5, 1947, nobody was expecting such a turbulent story. Over seven decades of life, the company had many difficult times, including the current administration on its last legs.

Until the ‘90s, the business was simply booming. In 1960, the company became the official carrier for the Olympic Games in Rome. In 1973, it was one of the first to open the Rome-Tokyo route. In 1993, not only was Alitalia carrying 38,7% of all passengers internationally, but it was also the third largest European airline behind Lufthansa and British Airways.

A never-ending downturn

In the mid ‘90s, Alitalia experienced its first crisis, due to the opening-up of more international markets and the increased competition of low-cost airlines. Owing to these reasons, the company had more than 1 billion euros of losses in 1996.

In 1997, in order to turn the ship around, the new C.E.O. Cempella took the lead and changed the airline’s strategy. He tried to keep the costs down, while also creating a new corporation to run the short and medium range flights. Thanks to this new company, many people who were fired in 1996 could return to work with the new employer, which managed to cut labour costs from 27% to 20%. Moreover, the savings were used to absorb the increasing price of oil and the competition of low-cost airlines.

The last idea to help change things around was to merge with the Dutch company KLM in 1999, as the board was planning to let Alitalia maintain control over the shorter routes and KLM would maintain control over the longer routes. The idea struggled to take off though, because the necessary reconstruction at Malpensa airport in Milan was very slow going. On top of that, there were debates about how many of the flights Malpensa should have, because it was then considered large and very international, compared to the Linate airport also in Milan, where Alitalia’s headquarters was, or to the old Fiumicino airport in Rome. Due to construction delays, experts estimated that Alitalia lost millions every month. Lastly, KLM withdrew from the agreement in 2000, paying the amount of 250 million euros as a penalty fee. This was the last year that Alitalia would have a positive revenue.

In fact, 2003 represents the beginning of a very long trudge, lasting until today. Not only have many governments tried — and partially managed, in 2008 — to undertake the company’s privatization, but in the meanwhile there were also many state loans that have not led to success. All of these transfusions of public money aiming to keep Alitalia alive had cost 8 billion euros over 10 years. This doesn’t even take into account the 1 billion euros that Di Maio has promised the government would give soon.

2019: analysis of a controversial plan

So, here we are. It is not news that the Minister of Economic Development found some possible buyers to reboot the company. Just like in the movies where actors find themselves reluctantly on a wild-goose chase, the purchasers are looking to eliminate any staff not willing to accomplish a titanic goal. The State Railway is on board, since it could not say no to its own owner, the Italian government. The Italian Treasury joined the in, to draw to the company the interests on the loan that the department itself had given in the last years.

Those two are going to make up 50% of the ownership. Only Delta, with 15% of the shares, is in the air transportation field. After a long search, the rest of the shares will be controlled by a company, itself owned by the Benetton family, called Atlantia.

A question may arise now. Why does the Benetton family have a finger in the Alitalia’s pie? People remember how the yellow-green government undertoook a crusade against Atlantia, Italian holding operating highways, and they were blamed for the Morandi bridge collapse disaster in Genoa last year. The cabinet itself threatened the company to withdraw the concession itself, which gave Atlantia more than 1,5 billion euros in profit. Probably, while Di Maio was desperately looking for a purchaser in the Alitalia adventure, the Benetton family thought that it would be better to invest money in saving the national airline company, in order to negotiate better terms for their main business — the Italian highways.

Lastly, according to Delta, the company should save what can be saved. In fact, there are 11.000 employees for the 100 aircrafts which carries only one-sixth of all the passengers going to Italy and one-twelfth of those going abroad. The American airline suggested that Alitalia should cut all the unprofitable and non-strategical routes, which is against the role of a national airline company, whose aim is to safeguard public interests. Against Di Maio’s sovereign plan, thus, Delta urged Alitalia to accept becoming smaller and more efficient, with all that implies. As the situation looks grim and unfavourable, we should hope that, at least in the long run, this will be an opportunity for Alitalia’s recovery.