News analysis: Alitalia's rescue plan is finally in place, but its survival is still not guaranteed

Source: Xinhua| 2019-07-25 21:26:49|Editor: xuxin
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ROME, July 25 (Xinhua) -- Italy's beleaguered national airline finally has a rescue plan in place. But it remains unclear whether the strategy will be enough to make the company profitable after years of losses, or whether it will simply buy it time until another crisis hits.

Alitalia's third major rescue plan in a decade involves Italy's national train operator Ferrovia dello Stato and motorway and airport operator Atlantia each investing at least 350 million euros (390 million U.S. dollars), with the Italian state adding 150 million euros (167 million U.S. dollars) and U.S.-based air carrier Delta adding at least 100 million euros (111 million U.S. dollars).

The rescue plan calls for the new money to be used to pay operating expenses while re-focusing the troubled airline on core business sectors in a drive to return to profit for the first time in 20 years.

"On paper, the indications are that the plan will work," Giovanni Dragoni, an airline sector analyst and the author of a book on the repeated rescue plans for Alitalia, told Xinhua. "What we don't know is how the plan will be carried out."

According to Dragoni, the rescue plan would see Alitalia reduce its flight network by removing unprofitable routes, while adding new long-haul routes such as Rome to Shanghai and San Francisco. It will also develop synergies with the Ferrovia dello Stato to offer single tickets that include both air and rail services and will offer high-end business-class services on some routes where it competes with rivals that do not offer such options.

The plan calls for Alitalia -- which lost 500 million euros (556 million U.S. dollars) last year, nearly 1.5 million euros (1.67 million U.S. dollars per day) -- to reduce operating losses to 185 million euros (206 million U.S. dollars) in 2020, to 148 million euros (165 million U.S. dollars) in 2021, before turning a 53-million-euro (59-million-U.S.-dollar) profit in 2022.

If that happens, it will be the first operating profit Alitalia has earned since 1999, according to Andrea Giuricin, a finance and mobility management professor at Milan's Bicocca University.

Giuricin is less optimistic about Alitalia's future than Dragoni, arguing that the Italian carrier lacks the economy of scale to compete against European rivals.

"Alitalia last year carried 21 million passengers," Giuricin said in an interview. "To succeed they will have to compete with rivals that include Lufthansa, British Airways and its partners, and Air France-KLM, not to mention Ryanair and EasyJet. All of those companies carry at least 100 million passengers a year."

He went on: "Alitalia's best hope for long-term survival is to become part of a bigger company," he said. "Otherwise, this money will run out and we will have another crisis in two years."

Though Delta is a minority partner in the new alliance, Alitalia will not become a part of its far larger rival from the United States. Both Dragoni and Giuricin said the main reason for Delta's investment was to prevent Alitalia from becoming part of Lufthansa's expansive network. Lufthansa is one of Delta's main rivals on profitable routes across the northern Atlantic.