The joke goes that Italian airlines will be profitable…when hell freezes over. Why is it that airlines seem to struggle in Italy?
In an article entitled, Good Luck To Any Airline That Tries To Make A Profit Flying U.S.-Italy, Ted Reed suggests it is due to Mideast subsides. I’ve called out Mr. Reed before for being a shill for U.S. airlines in attacking Gulf carriers and will do so again here.
In his opening paragraph, he describes a U.S.-Italy aviation market “where competition is dominated by subsidized Mideast carriers and financially troubled European carriers.” Interestingly, he doesn’t mention that Alitalia, the flag carrier of Italy, is heavily subsidized by the Italian government and sine qua non the greatest market disurptor. Instead, he reserves his focus on Emirates’ Fifth Freedom flight between New York and Milan, arguing “Italy seems to represent a land of enchantment for the subsidized Mideast carriers.”
Really? That’s a lot of assumptions, especially because he uses “facts” like, “The governments of Qatar and the United Arab Emirates have provided the Middle East three with about $52 billion in subsidies, according to a study funded by the U.S. carriers.”
That “study” has been thoroughly debunked. This is not some crackpot blogger, but a Forbes columnist…
Inexcusable Errors
Reed lacks basic knowledge of airline routes/hubs, adding:
Emirates has utilized fifth freedom rights, enabling it to fly between two foreign countries, to fly Milan-New York. Italian authorities approved its Doha-Milan-JFK route in 2013.
(red bolding mine)
Really? I didn’t know Emirates had a hub in Doha. In fact, last I heard they had blocked all flights between Doha and Dubai…
That’s not just a spelling error. That’s pure sloppiness.
But it gets even worse.
Qatar’s ownership of 49% of Air Italy is viewed by the big three U.S. carriers – American, Delta and United – as a way to circumvent a 2018 agreement that prohibits additional fifth freedom flights by the Mideast carriers.
Small problem Ted: the 2018 agreement does not prohibit additional Fifth Freedom flights by Mideast carriers.
More inexcusably sloppy reporting.
So in Reed’s world, it’s a single flights on Emirates between Milan and New York and four flights on Air Italy, including two served by no U.S. carrier, that are the root of the problem.
@tedreednc Are you on the payroll of @AirlinesDotOrg?
— Matthew Klint (@LiveandLetsFly) August 26, 2019
A Market Dominated by Leisure Travel
Here’s the real reason airlines, including U.S. airlines, struggle in Italy: it’s primarily a leisure market. U.S. airlines, like their Gulf counterparts, need premium travel to profit. In a market dominated by seasonal tourism, business fares do not command the demand to sustain profitability.
Throw in Norwegian, which has put downward pressure on economy class fares, and perennially unprofitable Alitalia, and it becomes icing on the cake. It’s very clear why it is financially challenging to operate in Italy and Emirates’ one Fifth Freedom flight between New York and Milan is hardly to blame.
CONCLUSION
Reed just cannot help himself, writing later in his story:
To the three global U.S. carriers, the [Italian] market is manipulated by Middle East carriers who want to dump capacity.
Right. That’s it. To “bolster” his point, he quotes Peter Carter, Delta’s Executive Vice President and Chief Legal Officer.
Everybody understands steel dumping. But dumping airline seats so far hasn’t seemed overly concerning to regulators in Europe and the U.S.
Maybe because even protectionist President Trump saw through the utterly indefensible argument made by U.S airlines.
What a joke of a “travel” writer.
The real reason airlines struggle in Italy is because it is a tough market. A market dominated by seasonal leisure travelers without more robust business travel is a difficult moneymaker in any country. Throw in an Italian government who has eternal patience for beleaguered Alitalia and you have a distorted market that will continue to vex carriers, both Gulf and U.S. alike.
Italy doesn’t have a lucrative domestic route ( MEL-SYD- BNE makes about 90% of QANTAS ‘ profit, and isn’t it the same in the USA?). In Italy everyone takes the train: Rome- Milan x 25 per day.
Indeed the bigger question is why an *italian* airline can’t make a profit – and this plus labor seems why.
US – Italy longhaul being marginally profitable seems not much of a big deal for the US carriers. Emirates or not it wouldn’t be all that lucrative. Milan has fashion traffic but it’s nowhere near a financial center like FRA, LHR, CDG.
Emirates I think is there for the low operating cost of MXP but could be wrong.
Another unedited Forbes “contributor” posting unchecked nonsense on the site.
It’s really very sad.
There’s plenty of demand for flights to Italy, especially in the summer season, but few profitable business routes. That’s why the JFK-Milan route of Emirates is such a brutal blow, because it takes a bite out of one of the most lucrative longhaul premium routes to Italy. There are many people buying business class tickets to fly to Milan, arguably the fashion capital in Europe and one its biggest business hubs.
It’s all good to call out a writer for bad writing and bad reporting. But, the price-dumping tactics of the Middle Eastern carriers are well documented, and evident. The lobbying efforts of the US big 3 are not even necessary in order to call attention to this. Just look at how many A380s Emirates are operating at a loss. Etihad, Qatar, and to a lesser degree Emirates, are not really businesses supported by their local governments (the way airlines in many other countries are) so much as geopolitical pawns to serve the interests of their home countries.
Yes, Alitalia is government-subsidized, but it is also (and has always been) the national airline of Italy, and the country’s economy would be hurt significantly if the airline went under. A country subsidizing its national airline is perfectly acceptable and happens everywhere – that’s not the issue here. The problem is that the ME airlines are different because the subsidies are on a totally different scale, and they have been pursuing a strategy of global expansion not for the purpose of making a business profit, but purely taking market share away from US and European airlines, in order to inflict economic damage.
We should always think about who we are paying when we buy a ticket. Read about what the dictatorship (pardon me, “kingdom”) of Qatar is like and its political history and actions in the past 10 years. Would you really rather buy a ticket from this airline, than, say, BA or LH or Austrian, just because the seat is a tiny bit more comfy?
“That’s why the JFK-Milan route of Emirates is such a brutal blow, because it takes a bite out of one of the most lucrative longhaul premium routes to Italy. There are many people buying business class tickets to fly to Milan, arguably the fashion capital in Europe and one its biggest business hubs.”
-> If plenty of people buy business / first class tickets, why is it a blow to the US3 if just one more
airline, Emirates, joins in?
“Just look at how many A380s Emirates are operating at a loss.”
-> I’d like to know. Can you provide a link?
“A country subsidizing its national airline is perfectly acceptable and happens everywhere – that’s not the issue here. The problem is that the ME airlines are different because the subsidies are on a totally different scale”
-> So, subsidies are okay as long as they aren’t too large? Who decides? Delta? American? United?
“…not for the purpose of making a business profit, but purely taking market share away from US and European airlines, in order to inflict economic damage.”
-> The Clinton, Bush, Obama and Trump administrations have failed to see through this dangerous strategy – along with the governments of France, Germany, the UK, Japan and China among many.
“We should always think about who we are paying when we buy a ticket.”
-> You suggest BA or LH. Why? Should we excuse them their colonialist / militaristic past? How would I get travel righteously from, say, Toronto to Colombo / Hyderabad / Bangalore / Dhaka with just 1 or 2 stops without taking an airline associated with a country without a murderous past and excluding the ME3.
I do not have a link for the A380 flights since I can’t see Emirates’ books. However, given how expensive it is to fly a A380, and the kinds of routes they operate, it’s a pretty safe conclusion that very few of the A380 routes that Emirates operates are profitable. There is a reason that so many airlines won’t buy or operate the A380 and that the aircraft is getting phased out. Flights are only profitable if the plane flies almost entirely full.
So while there is no proof, everything we know about the A380 point in this direction.
That’s not a good argument about the colonialist and militaristic past – by that argument one could never take a stand against anything. Not excusing any countries colonialist past, but in the case of BA and LH those things are actually in the past, as opposed to the present. How about focusing on the present and recent history? As in, which countries are committing human rights violations right now?
Of course, sometimes we don’t have much of a choice when making purchasing decisions, and sometimes all choices on offer are problematic – but when we do, it is worth thinking about these kinds of implications. It just makes sense to consider factors other than price.
“….to Milan, arguably the fashion capital in Europe”
i think some random nobody who was at Biarritz over the weekend hosting the G7 might beg to differ
Well said, Matthew! Also, Italy can be argued to be difficult for a few other reasons: Primarily that it does not offer a geographic advantage for a convenient hub system like, say, CDG, FRA, or LHR. While, say, Alitalia, could effectively provide a strong hub system to Africa and the Middle East that might work – the second issue is who the heck wants to connect at an Italian airport? They are over crowded and awful and best for getting in and out as quickly as possible.
Italy does not offer a geographical advantage…
Who the heck wants to connect at an Italian Airport?
Do you have any more derogatory statements? I have a name for you and you don’t like it.
Lol. Angry much? No, MXP and FCO do not offer the same geographical advantage as do places like FRA, LHR, or CDG in terms of connecting. How is that derogatory? And, given my time at FCO and MXP I would hardly compare them in facilities and comfort to places like ZRH, MUC, or FRA. Yes, that might be derogatory. But also justified. If given a choice between a connection at FCO or ZRH who would not choose Zurich? Organized, great lounges, restaurants, duty free, and rarely feels crowded.
Don’t hesitate to call me a “name” for making a fairly mundane assessment. If you are that angry in life to find hostility over a comment like this, than, by all means, insult away. I can take it and you clearly need to vent some of that hostility.
I fly to Rome from Montreal every so often. I find the Rome airport extremely efficient every time I’ve landed. From the buses meeting u at the plane to customs. In & out in no time everytime.
Yes, but do you connect there? To another destination? That is my point. As I said, “best for in and out quickly.” But to the point of the main article that is not enough. Italy is a seasonal destination and not attracting premium customers year round and missing what FRA and CDG get…the business traveler who is connecting to Prague (as an example).
No matter how stupid your argument is, if your target market is as stupid as you, you’ll be crowned a saviour. Stupid people needs stupid recognition for their stupid arguments. Who else best gave it beside another stupid. All in the “freedom of speech” kind a thing… Hahaha
Ahhh… the days when one could travel to Italy and back without having to even step aboard an airliner…
How I miss Italia – better known to Americans as the Italian Line (Talk about government subsidies!) The VULCANIA, SATURNIA, GIULIO CESARE, AUGUSTUS, CRISTOFORO COLOMBO, LEONARDO DA VINCI, MICHELANGELO, RAFFAELLO… (I’m leaving-off ANDREA DORIA as I’m thinking only pleasant thoughts!) Regular year-round sailings from ports in North and South America.
Italia ships sailed the ‘Sunny Southern Route’ to the Mediterranean. Tiered swimming pools. Delicious pastas. Red and white wines included with meals. Stewards and stewardesses who looked like film stars! Dancing at night on deck to ‘Arrivederci, Roma’. And after disembarking in Naples, one could reach Capri, Ischia or the Amalfi in only about an hour.
‘Progress’, is not always a good thing.
What a great walk down memory lane. Thanks for sharing Kenneth!
For Australians the memory is of the Triestino line ships Galileo and Marconi; hundreds of thousands of Italian migrants arrived in the late 40s, ‘50s and ‘60s ( and the return voyage gave cheap albeit slow, access to Europe in the pre/early Jet era).
You’re so right, Paolo.
Lloyd Triestino’s GALILEO GALILEI and GUGLIELMO MARCONI, built in the early 60’s, were two of Italy’s most beautiful and successful liners – though their names were tongue-twisters for non-Italians!
Flying between Europe and Australia was an expensive, multi-stop affair in the 60’s and early 70’s and these virtually identical, completely air-conditioned (a big deal at the time) sister-ships were highly successful.
I had the good fortune to sail aboard GALILEO late in her career. After their retirement from Lloyd Triestino (having been done-in by the Boeing 747) both ships went on to new lives; GALILEO with Greek-owned Chandris Lines and MARCONI with Italy’s Costa Cruises.)
I think the new Palermo route is going to be pretty profitable. Getting to Palermo/Sicily from Milan or Rome isn’t as simple as just hopping on a high-speed train after the flight and arriving the same day, so United can charge a premium for direct flights to Sicily — and Sicily, long ignored by American travelers, is an increasingly popular destination for high-end travel.