LONDON — Two European carriers: one high-profile, the other almost invisible after past glories had faded. The common factor between them – both were failing.
Alitalia is the proud national airline of Italy but has been perennially loss-making. As recently as 2013 it was burning through more than $1 million a day and facing warnings that it was likely to finally and irrevocably run out of cash. JAT was the flag-carrier for the former Yugoslavia but had shrunk to a shadow of its former size, battered by Western sanctions in the 1990s and hamstrung by lack of money.
Within the past two years both have received an infusion of funds – and new management input – from Abu Dhabi’s Etihad Airways, becoming the latest airlines to take their place in the collection of ‘equity partners’ that the Persian Gulf carrier is assembling.
JAT – promptly rebranded as Air Serbia after Etihad’s arrival to better reflect the country it now represents – has apparently pulled out of its death spiral, moving from a €73 million ($79 million) loss in 2013 to a modest but creditable €2.7 million net profit last year.
Alitalia has yet to turn in its first annual figures under the new regime, but is under strict warning that it must do better. Etihad’s president and CEO James Hogan, has said that Alitalia has a great brand and staff, as well as a potentially great future, but that personnel have to learn to do things differently if the company is to prosper.
The deal under which Etihad took a 49% stake in Alitalia also involves what Hogan has referred to as removing the “shackles of the past”, particularly the huge weight of debt that was crushing the airline, from the shoulders of senior managers.
Etihad sees Alitalia as providing a major boost to its transatlantic services, an area where Etihad’s connections are, as yet, relatively thin.
Alitalia’s long-haul services are being prioritized and less emphasis given to short-haul. Etihad is trying to work this for the benefit of both companies by offering Alitalia A320/A330 pilots the opportunity of transferring to Etihad’s 777 fleet, thus helping to feed the fast-growing Abu Dhabi-based airline’s requirement for new pilots.
A major plank in Etihad’s plan to revive Alitalia appears to be to pull it upmarket. The latter currently attains just a three-star rating from airline ranking organisation Skytrax; last October, outgoing CEO Gabriele Del Torchio said Alitalia was aiming at achieving five-star status in three years. This would be a remarkable achievement, given that Skytrax ranks only eight carriers worldwide as five-star operations and all are from the Far East or Middle East.
In Air Serbia’s case, Etihad’s task of pulling it round is arguably simpler, as the only way the airline could go was up.
Like many former Eastern Bloc airlines, the old JAT was concerned merely with moving people from A to B, with few of the amenities expected in the West.
When Etihad-appointed CEO, Dane Kondić, took the helm in 2013, he found a lack of leadership and investment in training. The latter problem has been solved by a voluntary redundancy scheme for those cabin crew unable to make the leap to more modern standards and putting their replacements through Etihad’s training system in Abu Dhabi.
The passenger experience has been further helped by the replacement of 10 1980s-vintage Boeing 737-300s with eight leased Airbus A319s and two A320s to plug the gap until late 2018 when it buys 10 A320neos from Etihad’s large order for the type. Unusually, Air Serbia has installeda separate business cabin in the Airbuses with eight seats in a 2-2 arrangement, compared to the more usual European ‘business’ arrangement of a standard 3-3 layout but with the centre seat in each bank of three blocked off to give passengers slightly more space and privacy if they want to work en route.
As with Alitalia, part of the deal has been that the debt burden is removed from Air Serbia’s balance sheet, with the government effectively swallowing the cost. In any case, said Kondić, much of the former state-owned airline’s debt was basically owed by one part of the government to another.
Staff numbers in the carrier’s administration have been slashed, cutting costs. “By every and any measure, turnover per employee compared to any European carrier was horrific,” he added. The situation is now much improved.
Under the new regime, aircraft utilisation has been roughly doubled from its previously dire level of five to six hours a day. This has enabled Kondić to hugely increase the fleet’s productivity and new destinations are being opened up. Additionally, the regional fleet of five ATR 72 turboprops is being used to open or strengthen routes to neighboring countries.
It is a sign of the enthusiasm that the revamped airline is generating that a cabin crew recruiting weekend in February attracted 1700 applicants for just 35 positions.
Kondic believes that Air Serbia will grow through partnerships and codeshares, with May seeing a new codeshare with Greece’s Aegean Airlines and strengthening existing arrangements with KLM and Etihad.
In the longer term he sees “no reason” why Air Serbia should not follow in the footsteps of its JAT predecessor and re-establish long-haul services.