Troubled Italian flag carrier Alitalia loses about €2,000,000 per day, according to a government minister. The solution? Another cash infusion…
Earlier this month, Italy appointed a new administrator, Giuseppe Leogrande, to oversee cost-cutting measures and find a buyer for Alitalia. At the same time, it granted Alitalia yet another bailout. Facing pressure from both the government and from workers, Leogrande will try to make Alitalia attractive to investors like Lufthansa or Delta, who have expressed interest in partnering or even acquiring it.
Italy’s Industry Minister Stefano Patuanelli revealed the startling daily losses that Alitalia has racked up, noting that the €2,000,000 per day is an average, not a set amount each day.
“We are talking about a loss that fluctuates during the year because the cash-flow is completely different in different periods of the year.”
Patuanelli’s statement was actually a clarification of a statement earlier in the week where he mistakenly said Alitalia lost about €2,000,000 per month.
Why It Matters
Ok, so Alitalia loses a lot of money. What’s the big deal? Doesn’t the government always just bail it out anyway?
While the answer to the last question is yes and there is actually no rational reason to believe that this restructure will be any different, this staggering daily loss so clearly demonstrates 1.) why Alitalia can’t find any investors and 2.) how difficult it will be to actually change.
What’s Alitalia realistically going to do to save money? Slashing salaries or cutting jobs will result in strikes, which cost the airline even more money. Cutting routes? Carriers generally find cutting their way to growth very difficult. Selling assets? They’re only so much that can be done and not enough to solve the systematic problem. Growth, including an investment in new aircraft requires large capital expenditures. Print more miles? The MilleMiglia program is already largely worthless and won’t sway discretionary travelers.
In short, I still fail to see a way forward for Alitalia. At the same time, the continued government infusions undermine competitors like Air Italy, who are also struggling but face an uneven playing field on their home turf.
CONCLUSION
It does take money to make money, though it seems Alitalia is simply burning through it. Even with the government unwilling to let it fail, Alitalia’s poor performance calls out for serious reforms. But is it too late? What can realistically be achieved? I’m stumped.
There are only two types of airline now. Those who have bank cobranded credit cards, and those who don’t. Thats the difference between making a profit and drown in debt.
Pretty soon, sky team will just be Delta and all airline delta bought, lol.
I’m looking at some award flights in July using Alitalia miles. Business class is just 48k points one way. Is there any chance they cease operation…or will the govt continue to pump cash in indefinitely ?
I’d be a bit wary…but if the past is any indication of the future, you’ll be fine. Honestly, if it were me I would lock in the 48K award.
Chris has a good point regarding the cobranded credit cards. I would add one more question; are airlines involved in a quasi-Ponzi scheme with all these miles issued?
Probably not so much. Almost anywhere miles can only be collected through flying with a bit of top-up through shopping. The US seems the only place where miles are thrown around like freebies, creating some inflationary pressure on the schemes.
Ryanair is one of the most profitable airlines. The writing is clear. People have no self respect and want to be treated like cattle. Look at the political choices they are making the world over. Giving up their freedoms to strong men with fake promises.
Alitalia should let the mafia run it
My question is how long the credit card companies will see the points game as advantageous? The airlines continue to walk a fine line and “adjust” their programs as the points are a threat to the other side of their balance sheet vs. the revenue the receive from selling the points.
In my circle of friends, which is small, most have given up on “points” as the restrictions, confusion and complications of trying to use them are not worth it for .01 to .02 $ per point.
Now we see the airlines rightfully going after those who are violating terms.
All this plus pressure from the lefties to stop all the pollution from flying.
At some point all this will come full circle and the credit card companies will back away. There are only so many people to sign-up or convert from another card.
Then what happens? Fares go up I would assume.
Alitalia….just let it die already.
Italian business travelers fly non-Italian airlines for the most part and that the airline bread and butter.
But then, we’re talking about the airline that gives female staff three days medical leave every month for their periods…
Just came off an AZ flight. They might be losing money but quality has not suffered. Very pleasant flight.