What you need to know about Italy’s troubled airlines

Image copyright Corbis Image caption Govichi Saraki has been warned Italy could fall into a race to the bottom if AirBnB is not halted A collapse of Italian airline Alitalia and the fuel crisis…

What you need to know about Italy's troubled airlines

Image copyright Corbis Image caption Govichi Saraki has been warned Italy could fall into a race to the bottom if AirBnB is not halted

A collapse of Italian airline Alitalia and the fuel crisis have added to plans for more costs and jobs, already forecast to exceed 40,000 over the next five years.

Should BAX be declared bankrupt, Alitalia would merge with it.

But cutting costs will not come cheap. Agreements with unions and other stakeholders could cost Italy €4.9bn ($5.7bn; £4.3bn).

What is the Italian high-speed rail link?

Italy’s state-owned rail company, Ferrovie dello Stato, transports 5.8 million passengers a year.

Alitalia wants to run more services, just when the railway has nearly reached its capacity.

Easing the way for that to happen will be an important part of the railway’s restructuring plan, announced in April.

The state-owned rail company runs high-speed trains

It increased the capacity of the network, building new routes linking Milan to Rome, and took over management of its cargo arm, which supplied inbound long-haul flights.

High-speed “Regione” trains run at 190km/h, compared with the Italy’s historic system of slower commuter and intercity trains, which were a part of the transport of the nation in its final days.

The state-owned railway has a 65% stake in Italian high-speed rail

It was a once-mighty company, providing high-speed links to Europe and Israel, and had its own fleet of coaches.

But high costs mean that currently the state-owned railway is losing around €1bn a year.

“The system is fully integrated with social aspects, especially in terms of compensation, which is not sustainable in the long term,” said Enrico Letta, Alitalia’s board chairman.

The problems with the business started in 2013. Without proper investment, the stock plummeted from €11.9bn to €920m, while revenues dropped by 25%.

Its most basic difficulty has been to compete with an ambitious expansion of the French high-speed system in recent years.

Italy’s president, Sergio Mattarella, said that dealing with Alitalia’s fate would be a vital part of any restructuring of the country’s banking system and the future of one of Europe’s biggest companies.

Mr Letta promised that, if the company is unravelled, one-third of the cost of restructuring would be on government debt.

What about AirBnB?

Alitalia’s dire state is not the only concern facing Italy’s carriers.

Both Air Italy and TAP Airlines had to stop operations as a result of a ban on ticket sales from October until June.

Airports are being left empty, with airlines failing to replace capacity. TAP was joined by the airline AirBnB and numerous other flightless areas in countries including Austria, Czech Republic, Ireland, Switzerland, Norway, Portugal and the UK.

Airport chiefs have warned that commercial air travel is a much bigger business in Italy than it is in Spain.

So far the carriers have not been hit by the impact of Brexit, as the scheduled flights are in France. However, there is increased concern that there could be trouble for some airlines when Britain exits the EU in March next year.

TRAGEDY – 2001 BOMBING – LONDON – £4.26bn

Getty Images Image caption Italian airliner Alitalia was in the news again, but for this terrible reason

Prior to the announcement, analysts in Italy had been expecting news on how Europe’s two biggest airlines, Air France-KLM and British Airways, had been selling tickets to Britain for after Britain leaves the EU.

The two groups last year announced the creation of a “new British airline” so as to avoid the need for a Brexit “hard landing”.

In May, the two airlines started selling tickets for flights to “new destinations” in the spring.

“They want to make sure they don’t see a full-blown economic and political impact,” said Laurie Roux at S&P Global Platts, who predicted the airlines could cut and charge in anticipation of a potential drop in demand.

“They want to ensure that they don’t fall out of bed when we leave,” he said.

Italy already faces dwindling passengers as a result of economic decline and the quality of Italian travellers has come under fire over the past few years.

Meanwhile, rival budget airlines have grown in Italy. EasyJet and Ryanair had used the double-digit rises in passengers carried by Air France-KLM and TAP Airlines to scoop up market share.

Despite that, the two airlines told a parliamentary hearing in June that they will grow their share

Leave a Comment