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New Alitalia Starts To Take Shape
After the decision by the Italian Government to renationalize Alitalia due to the current crisis caused by the COVID-19 pandemic, a few details are starting to surface concerning the future shape and size of the newly re-formed Italian flag carrier.
The first rumors leaked from governmental sources were suggesting a much smaller carrier, with maximum 25-30 aircraft, focusing on short and medium-haul with only a limited number of long-haul services, however, this hypothesis has been firmly denied by the government during the first virtual meeting with the unions last week.
The airline will be smaller than it is now, with a maximum of 70 aircraft against the 113 currently in the fleet (already due to shrink to 103 by the end of 2020 due to some end-of-lease returns). As of January 2020, Alitalia had 72 leased aircraft over a total of 113, which means 64 percent of the fleet: this is one of the highest shares of leased aircraft among traditional carriers in Europe, requiring a monthly expenditure of approximately 19 million euros, according to Italian newspaper Corriere della Sera.
Currently, Alitalia is operating a limited domestic and international schedule from hubs in Rome Fiumicino and Milan Malpensa, mainly using fully owned aircraft, and is planning to ramp up its operations to 608 weekly flights as of April 6 from the 269 weekly flights currently being operated.
Milan Linate Airport, a business airport only seven kilometers from the city center where Alitalia controls over 70 percent of take-off and landing slots, has been closed by Italian authorities following the restrictions to personal movements introduced to contrast the COVID-19 pandemic and is scheduled to be reopened only on May 1.
The nationalization process has been sped up since funds in Alitalia’s accounts were starting to drying up due to the current very low demand experienced by most airlines around the world. The current level of bookings for all the airlines still flying is estimated to be approximately 90 percent lower than what is normally experienced at this time of the year, and this was creating an urgent cash flow problem for Alitalia.
For this reason, the Italian Government included in a Presidential Decree an emergency funds injection for 500 million euros destined to “airlines operating public service routes.” Since Alitalia is the only airline in Italy operating under a public service obligation agreement, that covers the flights linking Rome and Milan to the airports of Cagliari and Alghero in the island of Sardinia, under the current terms of the Decree Alitalia would be the only beneficiary of those 500 million euros.
However, other carriers with an Italian Air Operator’s Certificate such as Lufthansa’s subsidiary Air Dolomiti, Blue Panorama and Neos are complaining to the Italian parliament, financial newspaper Il Sole 24 Ore reports. Their aim is to obtain part of that funding since the spirit of the initiative was to provide a lifeline to the entire Italian air transportation sector.
In the meantime, the special commissioner running Alitalia at the moment, Mr. Giuseppe Leogrande, has obtained permission from the government to layoff (with pay) further 2,900 employees until October 31, Milano Finanza reports. This brings the total of employees not currently working (but still receiving up to 80 percent of their salary due to further Government subsidies) to 6,860, more than half the entire workforce on the payroll.
Through the nationalization process, the airline will also create a “bad company” that will absorb all the current liabilities of the carrier, estimated between 0.8 and 1.2 billion euros, which will not be carried over to the new Alitalia and will be either covered by Italian taxpayers or written off by creditors.
Italian political parties are justifying the expensive operation with the need to maintain a flag carrier to operate in the interest of the country during an emergency, like the current COVID-19 epidemic, and to keep carrying tourists to Italy in order to sustain that important sector in the Italian economy.
However, although Alitalia is currently operating some repatriation flights on behalf of the Government to bring home some Italian citizens that were stranded around the world due to the mass flight cancelations caused by the current pandemic. Also other Italian carriers are performing those flights, and it would not be difficult in the current climate to find available aircraft to operate those flights on a charter basis.
Furthermore, Alitalia’s current market share of international traffic to and from Italy is around eight percent, therefore the carrier is not instrumental to the tourism industry in the country.
In early April the Government will meet again the unions to discuss the employment levels of the new Alitalia, which will need to be substantially lower than the current 11,000 units.
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