Alitalia Unveils New Business Plan
MIAMI — The Board of Directors of Alitalia has approved a business turnaround plan, intended to reduce costs by EUR1 billion (USD1.06 billion) through 2019 while boosting revenues by 30% over the same period.
In a statement, the Italian carrier said it will achieve the objectives by reducing operating costs and manpower. While no specific number of layoffs was quoted, Italy’s Corriere della Sera has reported that 2,000 administrative and ground handling staff would be dismissed. Also, pilot’s salaries would be cut by 30%.
The management of the Italian carrier is expected to present the approved plan to the Italian government “soon,” and then meet with labor unions to explain the details and scope of the business plan, so as to settle down the basis of a new collective labor agreement.
Alitalia shareholders, which include Etihad Airways with 49%, and a consortium of Italian banks and firms with the remaining 51%, have conditioned the funding for the plan on the approval of such labor agreement.
According to the airlnie, the business plan’s actions are supported by ‘four pillars of change’: “a recalibrated business model, costs reductions and enhanced productivity, optimization of network and partnership, and development commercial initiatives by utilizing technology investments to drive revenue.”
“With the approval today by the Board of Directors of the second phase of our business plan, we can now accelerate our actions towards turning around Alitalia. We rebuilt our brand in the first phase and invested heavily in staff training and technology, so we are now able to move ahead and implement wide-ranging changes,” Cramer Ball, CEO of Alitalia, said in a statement.
The Board of directors consider that some of these actions are “radical and necessary” to stabilize the airline and secure its long-term sustainability.
If fully implemented, Alitalia would expect to become profitable by 2019.
To achieve profitability, the airline will cut its fleet of 78 Airbus A320 family aircraft to just 20 aircraft by 2018. The small fleet will see an increase in utilization, with extra seats added and ancillary services offered on flights of four hours or less. The set of measures is intended to increase revenue while reducing operational costs.
The wide-body intercontinental flights will rely on a full-service model, with a “strong focus” on cost discipline and efficiency. All Airbus A330-200s and Boeing 777-200ERs will be fitted with the carrier’s new in-flight entertainment suite and Wi-Fi. Also, a Boeing 777-300ER will join the fleet in August this year.
Alitalia plans to grow its presence in the Americas by adding new destinations, while increasing the frequency of flights to the existing ones and building up its presence in Milan, Linate, Sicily and Sardinia.
“I am confident that the next phase of the industrial plan will represent the step forward needed, provided that all interested parties play their part. The radical and necessary measures across the entire airline will secure our long-term sustainability, which will only materialize if the airline is the right size, the right shape and with the right productivity and cost base,” Ball concluded.
Under the original plan, Alitalia should have broken even in 2017 in terms of operating and net profits. However, in the two years since Etihad arrived, the so-called “Alitalia 3.0” has racked up over EUR1 billion in operating losses.