Alitalia on its way to 2017 profit with ‘most radical and fastest’ turnaround plan

Italy's loss-making legacy carrier launched turnaround plan when Etihad acquired equity stake in 2014 and remains ‘on track’.

Above, Alitalia's new livery on an Airbus A330 aircraft. Courtesy Alitalia

ROME // Alitalia’s senior management has said that the turnaround plan embarked upon last year is still on course, with heavy investment already having been made in the business.

James Hogan, Alitalia's vice chairman and the group chief executive of Etihad, which bought a 49 per cent stake in the loss-making carrier in 2014 for €560 million (Dh2.3 billion), said that its turnaround of Italy's legacy airline "has been the most radical and the fastest plan we've worked [on] to create a road map to a world-class airline – where Alitalia once was many years ago".

Mr Hogan said that Alitalia, which recently announced a full-year loss of €199.1m – a €381m reduction on the €580m loss declared in 2014 – remains “on track”.

“What we’ve said, we’ve delivered. The plan for 2017 was to break even. The only adjustment to the plan has been the fact that we want to make money in 2017.”

Cramer Ball, the recently appointed chief executive of Alitalia, said that the interiors of all of Alitalia’s existing 122 aircraft have been refitted in just five months, and that all of its wide-bodied aircraft will be fitted with Wi-Fi and new in-flight entertainment systems by the middle of next year.

He said that its team had also spent “16 to 18 hour” days in recent weeks assessing routes to establish which ones could be turned around, and which may have to be cut to deploy resources elsewhere in the group. One key target it has set has been to increase its load factor to more than 80 per cent from the current 76 per cent, which Mr Hogan described as “a fundamental threshold for any pan-European and global airline for its domestic market”.

More than €400m worth of investment is being made this year – €240m of which will be spent on boosting its fleet and on the cabin refurbishments, €86m on improving airport lounges and in-flight entertainment services, €44m on technology and €32m on infrastructure. One new Boeing 777-200ER is being added to the fleet this year, and one 777-300ER and an Airbus A330 are being added next year. Its operating fleet numbers 122.

New long-haul routes are starting over the next three months from Italy to Santiago, Mexico City and Beijing, and other markets are being targeted in North and South America and the Far East.

“We have a view that Alitalia can go to 40 long-haul aircraft,” said Mr Hogan. “We have access to the aircraft through the partners – whether it is 787s, A350s or recycled A330s. We’ve already placed some aircraft in Alitalia, but we want to ensure we can feed the Italian hubs to improve the load factor and the quality.”

Mr Hogan also said Etihad’s investment had paid off in terms of network development, with Abu Dhabi being used as a hub for Alitalia travellers to Australasia, India and South East Asia. Etihad and Alitalia have shared more than 470,000 passengers since the beginning of last year, he said, and a total of 1.2 million passengers have been shared with all of Etihad’s partner airlines, which also include India’s Jet Airways and airberlin.

Saj Ahmad, the chief analyst at Strategic Aero Research, said that “there’s a very good chance” Alitalia would achieve its initial aim of breaking even by next year.

“Since Etihad bought its stake, Alitalia has culled routes, staff and excess inefficient operations to help its balance sheet. The focus with Etihad’s codesharing partners has helped traffic and yield flows and as it stands, Alitalia has certainly improved in leaps and bounds.

“Without Etihad’s intervention, I doubt such changes would have happened,” he added.

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