What Does The Future Hold For Alitalia?

For the longest time, we’ve been holding our breath waiting for the Italian government to finally pull the plug on struggling Alitalia. But then, lo and behold, its main competitor Air Italy went and gave up the fight. What does this mean for Alitalia, and what can we expect from the flag-carrying airline now?

ALitalia rescue
Can Alitalia capitalize on the gap left by Air Italy? Photo: Alitalia

Alitalia’s 2019 was ‘better’

Alitalia has been on the brink of collapse for quite some time. Officially bankrupt since 2017, the airline has been on the receiving end of bailouts estimated to amount to some nine billion Euros, according to Reuters. The last handout was of some €400m ($433m) in December, which the Italian government says will be the very last.

Despite being unable to find a buyer for the airline, the Italian government can take some solace in the slightly improved results Alitalia achieved over the course of 2019. The airline’s end of year report shows that passenger revenue was up  1.7% and the numbers of long haul travelers improved by almost 5%.

Alitalia hasn’t turned a profit for 15 years. Photo: Alitalia

In fact, compared to 2017 Alitalia’s long haul network grew by some 14.7%. Its intercontinental sector has increased in revenue for 26 consecutive months, with revenue up by 10% compared to 2018. The airline was the second most punctual in Europe over the course of 2019, suggesting things are improving operationally.

With one of its main competitors now no more, could Alitalia turn things around and become a profitable airline in 2020?

Why can’t Italian airlines make a profit?

Anyone who’s ever attempted to get a photograph next to the Trevi Fountain or enjoy a romantic stroll past the canals in Venice will be acutely aware of just how popular Italy is as a tourist destination. CNTraveler pegs the annual overnight stays in the nation at more than 420 million, and it’s increasing every year.

Air Italy
Air Italy made mistakes in its route choices. Photo: Getty

With millions of visitors drawn to the culture, history and food of this fabulous country, why is it no Italian airline appears able to score a decent level of profitability? Clearly, the issue here is not the destination. United is adding its fifth Italian destination this May when it starts flying to Palermo, Sicily, and Delta too is beginning flights between Boston and Rome for the summer season.

Air Italy looked to Milan to provide the traffic to its network. The airline combined a robust domestic network with key long haul operations to cities including Miami, New York and Toronto. Despite what looked like a sound business plan, the airline lost money from the word go. While bad luck, such as the MAX grounding, certainly played a part, there was fundamentally something wrong with the airline’s business plan.

Air Italy
The grounding of the MAX didn’t help Air Italy’s situation. Photo: Air Italy

Some of its long haul routes were canceled before they even got started, others were dropped just shortly after launching. Mismanagement of route choices will have been costly for Air Italy, scuppering its long haul profitability while its short-haul successes were compounded by fierce competition from European low-cost carriers such as easyJet and Ryanair.

So while Air Italy is going to have to be chalked down to experience, could Alitalia capitalize on its more mature network and now decreased competition.

What’s in Alitalia’s future?

Make no mistake, Alitalia has some serious work to do before it’s out of the woods. The airline, which hasn’t posted a profit in over 15 years, has a window of opportunity offered up to it by the demise of Air Italy. But, it’s going to have to work hard to really capitalize on this break.

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It remains to be seen if Alitalia can take advantage of the gap in the market. Photo: Alitalia

In some ways, Air Italy only existed to pick up the pieces of Italian aviation that were predicted to be left behind when Alitalia collapsed. The fact the plug has been pulled on Air Italy, while disappointing for the airline and its employees, is a strong indication that Alitalia is expected to be around for some time yet.