Story ID: GPalitalia01202015
The 'New' Alitalia Unveils Turnaround Plan
By: Gregory Polek
Caption: Investors expect airline to reach profitability in 2017
Word Count: 516
The reconstituted board of Alitalia on Tuesday unveiled a new business strategy following the completion of an equity investment by Etihad Airways that saw the Abu Dhabi-based airline take a 49-percent stake in the Italian flag carrier.

The plan calls for a so-called three-hub strategy in Italy, under which Milan Malpensa hosts more long-haul services, while Milan Linate increases connectivity with partner airline hubs. Meanwhile, Rome Fiumicino will expand long-haul flying and continue to build on short- and medium-haul services “to maintain relevance to the Italian market.”

Alitalia said it would adjust schedules across the network to produce better connectivity and increase code-sharing with existing and new partners.

New routes from Rome include Berlin, Dusseldorf, San Francisco, Mexico City, Beijing, Seoul and Santiago, Chile. Plans also call for more flights to New York, Chicago, Rio de Janeiro and Etihad’s Abu Dhabi base.

Alitalia also plans to add 13 weekly flights from Milan Malpensa, including daily services to Abu Dhabi, four flights a week to Shanghai and additional flights to Tokyo.

Ambitions to increase connectivity with Etihad Airways’ hub in Abu Dhabi will see Alitalia add daily services from Venice, Milan, Bologna and Catania, as well as more flights from Rome, all allowing onward connections to the Middle East, Africa, the Indian subcontinent, Southeast Asia, China and Australia.

Plans also call for deepening relationships with fellow Skyteam alliance members and, in particular, Air France/KLM and Delta, and a “major” new partnership with Eithad equity partner Air Berlin and its Austrian subsidiary, Niki, along with increased connectivity with Etihad Airways. The board also identified plans to work more closely with Air Serbia and Etihad Regional. 

Alitalia has begun the process of relocating 14 Airbus A320s to Air Berlin and “looking into options” with Etihad Airways to acquire more widebodies. The Italian flag carrier also could take aircraft from Etihad Airways’ existing order book. Alitalia now flies 12 Airbus A330-200s and 10 Boeing 777-200ERs.

Under the new strategy, the company’s major investors have set a “clear” deadline for reaching profitability by 2017, according to Etihad CEO and Alitalia vice chairman James Hogan.

“In a market still beset by the continuing Eurozone crisis, anything other than rapid, decisive change is simply not an option,” said Hogan. “This is the right strategy, with the right management team to lead it. But there should be no doubts at all: we have made a commercial investment that must deliver a commercial return.”

Under the partnership, Etihad agreed to invest €560 million ($750 million), including €387.5 million for the equity stake in Alitalia, €112.5 million to acquire a 75-percent interest in the airline’s frequent-flier program and €60 million to acquire five slot pairs at London Heathrow Airport, which it leases back “at arm’s length” to Alitalia.

Existing Alitalia shareholders committed to investing another €300 million in the carrier. Financial institutions and bank shareholders have agreed to restructure €598 million in short- and medium-term debt and extend Alitalia a €300 million credit line.