Final call: Alitalia to shut down on October 15

The bankrupt Italian national carrier will be replaced by a new state-owned airline.

By David Flynn, August 25 2021
Final call: Alitalia to shut down on October 15

Long-struggling Italian flag carrier Alitalia will fly into the sunset on October 15, with the airline announcing overnight it has now stopped selling all tickets and will cancel all flights from that date.

In its place will be a new national airline named ITA (Italia Trasporto Aereo), state-backed successor to the airline which has been in bankruptcy since 2017.

ITA will inherit some of Alitalia's aircraft, staff and assets such as airport lounges – but not Alitalia's frequent flyer program, which will be abandoned in favour of an all-new loyalty scheme to be run by a third party.

Owned by the Italian Finance Ministry, with its debt slate wiped clean plus €700m in restart funding, the Rome-based airline will launch at half the size of Alitalia, with just 52 aircraft – of which only seven will be long-range twin-aisle jets – but plans to grow this to 78 aircraft by the end of 2022, and 105 jets by 2025.

ITA charts a new flightpath

ITA is set to add up to 81 new aircraft to its fleet, with Airbus reportedly in the lead to win a deal valued at US$5 billion – although Boeing could also swoop in with a heavily-discounted package deal.

The rebooted airline will employ less than a third of Alitalia's 10,000-strong workforce, and run competitive tenders for activities such as ground handling and maintenance, as well as its frequent flyer program.

Italy's new airline could face familiar challenges...
Italy's new airline could face familiar challenges...

ITA will initially focus on mainly domestic and intra-European flights, along with a handful of long-range routes from Rome and Milan to New York, Boston, Miami and Tokyo.

"Broadly speaking, the plan should focus on long-haul routes, the most profitable particularly those to the US," says ITA chief executive officer Fabio Lazzerini.

"The long-haul market means privileging the North American market which is under-served and extremely profitable, but further expansion is needed."

"South America is to be kept on standby; we have to think about Asia and China, while Japan is doing very well."

Challenges at home and abroad

The goal is to build a leaner carrier that can focus mainly on international markets, without getting bogged down by the costs and commitments that made Alitalia a ward of the government.

Successive governments have plowed more than €5 billion into the carrier after former shareholder Etihad Airways cut ties in 2017 (having itself invested €1.76 billion in 2014 to buy a 49% stake, followed by €80 million for a 75% stake in Alitalia's MilleMiglia loyalty scheme).

Roberto Gualtieri, Italy's Minister of Economy and Finance, sees the prospects of ITA as representing "a quality carrier capable of competing on the international market."

Newly-minted CEO Fabio Lazzerini wants to keep ITA's focus on profitable routes, "particularly those to the US."
Newly-minted CEO Fabio Lazzerini wants to keep ITA's focus on profitable routes, "particularly those to the US."

But ITA may be too small to compete against established airlines and is lacking a partner after years of talks with major carriers including Lufthansa and Delta Air Lines.

Lazzerini considers alliances will be "fundamental" to ITA's future.

"The world of airlines is a world of alliances. It is difficult to remain alone; there are few companies that remain alone. It is difficult to think of being isolated in a global world."

However, Lufthansa and other potential suitors that have accepted state aid from their own governments are either barred from investing under EU rules, or risk a political backlash if they make such a move before paying back their own rescue funding.

Long-haul travel also remains hobbled by widespread border curbs, and the corporate demand that's usually a key driver for intercontinental journeys is expected to take years to fully revive after the 16-month global pandemic.

Closer to home, low-cost competitors such as Ryanair and Wizz have been quick to leverage a lead in Italy's airspace, with flight-tracking firm OAG earlier this year reporting that Ryanair's share of the Italian market had soared from 22% in mid-2019 to 33%.

Additional reporting by Bloomberg

David

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

And so much for another Virgin Australia partner!

Joe
Joe

03 May 2013

Total posts 623

Will miss the Alitalia livery. The new ITA livery seems to lack any class.

Qantas - Qantas Frequent Flyer

26 Nov 2012

Total posts 93

They bought the livery as well so it’s staying

20 Oct 2015

Total posts 194

Sad to see Alitalia go, despite all its problems and the fact that even Etihad's billions could not fix it. Used to remember Alitalia flying into Melbourne in the 1980s. Let's hope ITA getting a fresh start will make a difference.

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 303

Just because certain airline/state owned carriers have billions such as Etihad, Singapore and Emirates it doesn't necessarily mean they'll be good investors.  

Etihad's dismal track record at their investments and Singapore's mediocre track record (especially in Australia - Ansett, Tiger and Virgin Australia) are two clear examples of this.

Most of those carriers are examples of "they should stick to their lane" - which is manage and operate their airline group well.

20 Oct 2015

Total posts 194

Yes, for many countries having a national airline is a matter of pride and seen as key for tourism and national spirit, and so it becomes inter-twined with politics and ego, that's when things go off the rails. Malaysia Airlines, Thai Airways and Garuda Indonesia are all good examples.

UA

09 Mar 2016

Total posts 58

Good riddance. Terrible airline in every way except for that B777 captain I picked up in the Piazza del Popolo in 2002.

Qantas - Qantas Frequent Flyer

26 Nov 2012

Total posts 93

That comment wins as “best of the day”  😂🤣😆

22 Jan 2018

Total posts 92

History will repeat w the Italians 

Etihad - Etihad Guest

06 Apr 2012

Total posts 115

Arrivederci !

Qantas - Qantas Frequent Flyer

11 Oct 2014

Total posts 648

My bet is that within 3-5 years, ITA will imitate life at Alitalia and be straight onto the Italian Government 'teat'.

If ITA is to expand international services - and that is to be done from both Rome and Milan - ITA will simply be perpetuating the age-old problem that even Alitalia's management admitted to. These two 'hubs' are way to close to each other to be able to compete.

Domestically and regionally, ITA will be trampled in its own home market by the likes of the Ryanair, Easyjet, Wizz LCC's, as well as a number of legacy-owned outfits including those owned by Lufthansa (Eurowings), Air France and IAG. 

AZ was never able to compete successfully on inter-European regional routes and even if ITA's costs are 50% lower than AZ's, they will still not match the established LCC's. ITA would be wise to avid trying to compete in the LCC market. Perhaps, it could try a niche approach along the lines of JetBlue? 

Secondly, joining an Alliance will be interesting: Air France / KLM (via SkyTeam) has always been indifferent to AZ, Star Alliance would be totally useless due to the number of competing carriers planted on all sides of Italy by LH, so the only choices are to sign up with oneworld or seek out an alliance with a major independent non-aligned carrier such Emirates. Etihad certainly won't be under consideration.

I'd suggest that ITA will need to examine possible NEW international destinations / routes that offer some level of unique appeal and profitability. The statements about international made by ITA's Lazzerini regarding the North American market and South America being on standby .. are simply rehashing AZ's previous failed strategies. 

If North America is such a profitable market, why is it that both American and United treat Rome and Milan as Summer seasonal only? South America could have some promise, but taking on Iberia in that market would be a recipe for failure. It may pay ITA to examine routes to Africa, China, and all of Asia as new markets - with less competition.

ITA would be wise to look to alternate strategies in serving both these Rome and Milan to international destinations. LH seems to be able to do this with both Frankfurt and Munich being similar close hubs, but LH has differentiated both hubs successfully.

All of the above points would need to be addressed by ITA well before it starts to examine placing orders for new aircraft (admittedly, in relatively modest numbers. But modest or not, EUR 5 billion is still a big hit for an airline which hasn;t operated a single flight yet.

Remember Meridiana ? Commonly known recently as Air Italy - with grand plans and a certain Qatari backer with wads of money who was going transform the market. We all know what happened there. Be careful Mr Lazzerini - and keep a tight reign on your expenditure and grand ideas.

Qantas - Qantas Frequent Flyer

29 May 2020

Total posts 23

Didnt the same thing happen back in 2008 when CAI took over the bankrupt airlines assets?

Cathay Pacific - The Marco Polo Club

20 Jun 2013

Total posts 42

Ciao and Arrivederci to Alitalia!

XWu
XWu

09 May 2020

Total posts 431

I thought the problem was always related to labour and management issues so if they plan to rehire the same mob with similar working conditions ITA would simply inherit the same problem 

Etihad - Etihad Guest

21 Jul 2019

Total posts 84

You thought correct. Alitalia was not actually an airline, it was an airborne welfare system that got milked for all it was worth by company parasites at many levels. If those same ones get re-employed at ITA, then I pity the Italian taxpayer.

Thai Airways International - Royal Orchid Plus

15 Jan 2013

Total posts 364

If they can compromise and find a partner for markets they don't serve in their own right it could well work.Sydney and Melbourne could be served via Seoul using Korean Air for the onwards sectors to Australia and the new carrier does the Rome to Seoul portions of the flights.

Qantas - Qantas Frequent Flyer

11 Oct 2014

Total posts 648

To serve SYD or MEL in a SKYTEAM alliance, wouldn't it be far more cost effective / efficient to fly to Denpasar - Bali (DPS) and connect Australian bound travellers on Garuda? Flying from FCO or MXP (Rome / Milan) to Seoul and then connecting to SYD would involve a lot of unnecessary extra mileage / hours / costs. I would suspect that Rome / Milan to Seoul might well be a more 'premium' business market whereas Rome / Milan to Denpasar - Bali (DPS) would be more tourist / VFR market for ITA. 

It could also be a more appealing (and direct) alternate route to LHR, for Aussies. Whilst ITA may be a (SYD-DPS-FCO-LHR) two-stop to LHR, for those looking for a more westerly arrival point in to Europe (from Australia / NZ) and then a subsequent post stopover onwards to London,  this could work well. It would also be less of a threat to Garuda's own service to LHR.

I'd suggest that partnering with Garuda would be preferable to partnering with KAL, who is about to  absorb Asiana and become a Korean monopoly token. ITA and Garuda both share a need to grow both revenue and profitability. Sorta like the "brother from another mother" ?

Mind you, it is not just a case of signing an alliance / codeshare agreement - but one that is 'metal neutral AND 'revenue-sharing' as well. 

Etihad - Etihad Guest

09 Jun 2019

Total posts 8

A pity to lose Alitalia's very appropriate acronym: Always Late In Takeoff Always Late In Arrival. We need a competition for an acronym for ITA.

19 Jul 2018

Total posts 6

My understanding is the new airline will actually be called……Alitalia! ITA has applied to whatever the equivalent of bankruptcy court in Italy is to buy the name, brand etc of Alitalia. ITA is basically a bankruptcy transition entity. 


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