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…
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.
— 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.
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.