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Alitalia Bankruptcy Coming, Who Will Dominate The Italian Sky In The Future?

In the past few decades, Alitalia has been relying on government subsidies to survive. In 2014, Etihad invested to acquire of 49% of Alitalia and plans to cut costs and concentrate on the development of international routes out of Rome and Milan to boost its profitability that are less concerned by low-cost airlines such as Easy Jet and Ryanair.

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In the past few decades, Alitalia has been relying on government subsidies to survive. In 2014, Etihad invested to acquire of 49% of Alitalia and plans to cut costs and concentrate on the development of international routes out of Rome and Milan to boost its profitability that are less concerned by low-cost airlines such as Easy Jet and Ryanair.

However, the acquisition ended with Etihad Airways’ suspension of investment and Alitalia has decided to file for bankruptcy. Afterwards, the Italian government provided a 900 million euro short-term bridge loan for Alitalia to help them maintain operations til the end of 2018. Due to the political instability in Italy’s recent general election, it is unclear whether or not Alitalia can obtain additional subsidies.

The players that may acquire Alitalia are investigating on various strategies to make Alitalia a face-lift and trying to split the Airline to keep those best-performing route network and fleet, or achieve deep-rooted permanent cuts. April 30 is the deadline for bids.

In 2017, Qatar Airways took the opportunity to acquire 49% of AQA Holdings, the parent company of Italy’s second-largest airline Meridiana Fly. In February, Meridian Airlines changed its name to Air Italy and announced plans to expand international routes and update its fleet.

According to the expansion plan, Air Italy will fly to Bangkok, Miami and New York from this year in addition to domestic air routes, and will add new international destinations in 2019. In April, Air Italy will receive the first of the 20 Boeing 737MAXs it has ordered, five Airbus A330-200s leased from Qatar Airways, and from May 2019, Air Italy will start receiving Boeing 787-9 aircraft. The total number will eventually reach 30. Air Italy’s goal is to establish a fleet of 50 aircraft by 2022 and serve 10 million passengers annually.

However, since Ryanair and EasyJet operate a large number of Italian domestic flights and flights from Italy, compared to international routes, Alitalia’s domestic routes are of relatively small value. According to the data of Airline Weekly, in the 12 months of July 2018, Italy is the country with the largest number of seats in terms of seating capacity for Ryanair, which is expected to increase by 6%.

The managing partner of Aviation Weekly, Seth Kaplan, said: “If Alitalia disappears, most of the markets occupied by Italian Airlines are likely to be divided up by the truly profitable airline.”

There are such precedents in reality. In 2012, Malév Hungarian Airlines, the national carrier of Hungary, was suspended after years of financial difficulties. Today, Wizz Air, EasyJet, Lufthansa, and other aviation divisions dominate the Hungarian aviation market.

Europe has also witnessed other aviation companies that have been operating since the 20th century but have survived for decades thanks to state subsidies. These aviation divisions were eventually defeated by market forces and went bankrupt. In 2001, Belgium’s Belgian Corporation for Air Navigation Services (Sabena SA) went bankrupt; in 2002, Swissair went bankrupt; in 2009, Greece’s Olympic Air was suspended; in 2015, the Portuguese government sold a majority stake in TAP Portugal.

For Alitalia, interested players may include: Lufthansa, Lufthansa’s previous acquisitions of Brussels Airlines, Austrian Airlines, and Switzerland’s bankruptcy carrier’s shares; Air France & KLM which once held 25% of Alitalia’s shares and Private investment company Cerberus Capital Management. In February, Frederic Cagey, Air France’s chief financial officer, said that Air France wanted Alitalia to remain a member of SkyTeam Alliance without buying shares from them.

According to informed sources, Thiborow Capital Management intends to acquire the entire Alitalia Airlines and plans to completely retain Alitalia.

Delta Airlines and Easy Jet may also be interested in Alitalia. Delta Airlines spokeswoman Olivia Cullis said that Delta is paying attention to Airline’s bankruptcy but does not comment on “rumors”. Delta Air Lines President Glen Hauenstein served as Chief Business and Operations Officer of Alitaliafrom 2003 to 2005.

 

Albert K. Field Albert is my name, and travel the world is my game. I began my passion for travel at a very young age, I started this website as a strong means to further explore the world of frequent flyers programs (FFP). The relationship between customers and service providers in the aviation and hospitality industry always seems to be in opposition, however, since the introduction of United Airlines’ Frequent Flyers Programm since 1972*. This has significantly eased the middle spectrum between 2 parties. While the aim of airlines is still to generate more revenue; but for us,as consumers, are also given the opportunity to participate in the bargaining and exploiting from service providers. Living in a world of globalization where big data becomes vital for simulating successful economical activities, most of us will have to travel to other locations whether willingly or unwillingly, while you hearing all this fascinating stories about others, In fact, you too, can blend into the trend. It may not sound like how media illustrates, but indeed there are possibilities for us to have more spontaneous travel without getting held back by financial situation. My website consists of reviews of airline premium cabin products,airport lounges and stay reports of 5-star hotels and their executive lounges across the globe. In addition to all of that, I care the most about their frequent flyers program and loyalty program, which also includes banking partners. Plus, I spontaneously put up reviews and news update regarding premium water brands and restaurants. The purpose of this website is to share all of this information with my audience as well as inviting you to be part of my journey.

1 Comment

1 Comment

  1. youke

    April 26, 2019 at 4:13 am

    Although when I read the article, this news has been obsolete for almost one year, the bandkrupt waves of European Aviation Divisions are still continuing. At least ten European airlines declared bankruptcy in the past six months. On March 28, 2019, Iceland-based Wow Air, known for its wow-ingly low-priced flights between Europe and North America, abruptly shuttered and announced it was bankrupt.
    Due to the risk of rising oil prices and exchange rate fluctuations, the European aviation industry has entered the stage of merger and restructuring, but for the airline itself, proper operation is the key to “standing up”.
    There is too much to discuss about how exchange rate fluctuations causes exchange losses, rising fuel prices results to a decline in profits, financing are becoming more difficult in this industry.
    Back to the story of Alitalia, we can find all kinds of clue/news online why this company faced such finacial dilemma. There are many factors: the external environment is not good, the fuel is rising, the European economic region is divided, and the recovery is weak. The Brexit also brings greater uncertainty to the operation of related airlines.
    But the internal operation also played the more important role. The board of directors and the labour unions ever formulated a rectification plan, including dismissal, salary reduction, and increasing working hours in exchange for 2 billion euros of capital injection by shareholders. Unfortunately, this program was rejected by the staff meeting. Isn’t it similar to the 2015 financial crisis in Greece,which the referendum rejected the EU and the IMF’s financial aid (required to increase tax and welfare restrictions)? It is another big and interesting topic about the balance of labor cost and staff welfare. But it is not hard to find out the company is lacking of the determination to control the operation cost.
    And the chaos in administration also can be concluded from the way how this company dealt with Bug Tickets. Other evidences can be found from all kinds of news to prove that the company is not operated efficiently.
    The European aviation market is more like complete competition. The core competitiveness of Aviation company could be brand recognition, market share and operational efficiency. WIthout clear marketing positioning and high-efficient internal management, companies are vulnerable when market demand is declining.

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Market Analysis

The 101 Of Doing Business In China, To Marriott, Delta, Qantas And More.

The furor raised by the apology letter from the CEO of the hotel chain giant Marriott has once again triggered the ever-stopping discussion on conducting business in China.

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The furor raised by the apology letter from the CEO of the hotel chain giant Marriott has once again triggered the ever-stopping discussion on conducting business in China. After a questionnaire was sent out in Mandarin to its loyalty program members, mainland Chinese members found themselves in disbelief when a whopping 5 options was provided when asking which country does its members are residing in? In addition to China,Hong Kong,Macau and Taiwan, Tibet was also listed alongside the country list where in theory, the Chinese government has always stated the historical fact that Tibet is an integral part of China, so is Taiwan. What seems so outward right to many of its members in mainland China, might just happened to be one of the most controversial and sensitive topic in geographic politics.

Picture from Travel daily Media

There is little to no need to talk about politics here, in simpler terms, the rest of the world have opposite opinions towards many territory disputes related to China, but for Marriott, such deliberate action on stating Tibet as a country in Mandarin and send it to its Chinese members is provoking the remaining dignity of so-called “face” in Chinese social norms. Although it remain unclear whether the action was done by a upper management team or bottom down staffs. A small work around would be to list your countries category into destinations or using a subcategory under China. These has been what hundreds of thousands of international corporations done to keep their penetration into the sweet sweet China market. In contrary, not only didn’t Marriott fix up the situation right away, their twitter handle happened to liked a tweet by a free-Tibet activist account thanking them for recognition. As a result, Marriott’s websites(including SPG) and apps are all shut down for a week by the order of the The Shanghai arm of the Cyberspace Administration of China.

What has happened to Marriott is not a rare case, however we have to reflect on the fact, a boycott led by millions of Chinese netizens will not only harm Marriott’s brand, but the thousands of local staffs who are working under their name, while in reality, Marriott today only owns around 40 hotels worldwide, the 100+ properties in China are largely owned by real estate developers, so in the end, a handful staff working for their royalty programs and those who report directly to Marriott would still be sitting in their offices sipping coffee and chitchat to pass the day by.

The heat didn’t just cool down from there, a new list of foreign corporations doing business has been gathered by the share “wisdom and power” of Chinese netizens, namebly Delta and Qantas, was also caught up in the nationalistic activism, like Marriott, Delta also listed Taiwan and Tibet as a country, alongside China, Hong Kong and Macau.

Picture from Delta website

No one is the beneficiary here, until this moment, all of the aforementioned companies have issued public apologies and fixed their website according to the administration’s rules. Again, I am not trying to discuss politics here due to how complicated and contentious the situation is.

As an international corporation, the fundamental guideline to follow is the law at the country you are operating, especially in a marketplace like China, they must know that what has done couldn’t benefit them in any positive way.

 

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Airline Reviews

Hainan Airlines To Fly Oslo – First Step Forward

Norway is the largest western European country without a flight to China, and is the smallest of western European countries with flights to Asia. Its only destination is Bangkok.

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Hainan Airlines To Fly Oslo – First Step Forward

Norway is the largest western European country without a flight to China, and is the smallest of western European countries with flights to Asia. Its only destination is Bangkok. Flights to Bangkok are operated by both Star Alliance member Thai Airways and European Ultra Low Cost Carrier Norwegian.

The local (Multi-)national carrier SAS had previously operated flights to Bangkok out of Copenhagen but decided to drop service altogether to shift focus on the US long haul market only.

Norway is a wealthy outward tourism country, perhaps the wealthiest out of all of Europe. Its national industries desires great air cargo transportation capability on exporting those world renowned seafood(salmon) and abundant natural resources (oil). Besides the strong outbound travel population, the country’s natural sceneries(fjords, northern light) can sufficiently attract all year round tourism as well not to mention its extreme and winter sports industries.

If any airline want to capture growth and gain market share nowadays, China can never be ignored. Due to sensitive issues like the Nobel Prize dissident before, relationship between Norway and China didn’t become normalised until earlier this year.

Comparing with Norway’s nordic neighbours: Finnair had launched direct flights to 6 cities(Beijing, Shanghai, Guangzhou, Chongqing, Xi’an, Nanjing) in mainland China and it’s still expanding; Both Stockholm and Copenhagen has direct flights to China(including Hong Kong) operated by SAS, Air China and Capital Air (Subsidiary of Hainan Airlines); even small Iceland had experienced spikes of Chinese tourists.

SAS had always favoured Stockholm and Copenhagen over Oslo when comes to long haul network expansion, perhaps due to the relatively higher costs of operation in Norway, but Norway is not a market that can be fully absorbed or replaced with alternatives, the need for Norway to secure direct flights to China not only lies in the national interests but also the “peer” pressure lies upon competition with its Scandinavian counterparts.

Home Growth With Home Carriers?

With likely the highest operating costs in the world, SAS today has become somewhat of a boutique airline where it can no longer using its hubs to filling more seats with connecting passengers, and possibility for it to grow it’s relatively low and their main business objective has shift to maximise efficiency on its already established route networks. Possibility for SAS to operate one extra route from Oslo to China is highly unlikely after its launch of the route from Stockholm to Hong Kong to complement its flights to Asia(Beijing, Shanghai, Tokyo) out of Copenhagen.

Other than SAS, Norway has another national carrier(sort of) that has been causing great disturbance all over the airline industry throughout it’s existence. Famously said by its CEO Bjørn Kjos:“go big or go home” during a TV interview on CNN, Norwegian has always considered China as its growth engine. As the so-called world’s next great budget airline, the problem for Norwegian flying from Oslo to China it’s not whether but rather when.

After numerous attempts by Norwegian to break the “outdated” and somewhat “discriminating” 1956 agreement between Scandinavia and Soviet Union which make SAS the only carrier can fly the Siberian Corridor to Asia. Lastest round of negotiation just happened in 9th November this year in Oslo has been confirmed to be unfortunately failed, Norwegian had planned to actually start flights from Tromso to Beijing, Shanghai and Tokyo and as well as flights from Stockholm, Denmark to other destinations in China, India and Thailand etc. to provide more passengers access to Norway’s winter tourism destination.

However, none of those will be realised in the short run unless Norwegian can gain access to fly the Siberian Corridor. It’s possible for Oslo to get flights in the long run to China which can be operated by one of their two home carriers, as for the midterm goal to allow more Asian tourism population reach Norway is depending on Chinese carriers.

Speaking of the “Angle” – Hainan Airlines To Fly Oslo

45 out of a total of 98 airports in Norway is operated by the government owned Avinor company, Oslo Gardemoen is the biggest airport in Norway which function as the gateway to the rest of Norway, in addition, the city of Oslo itself has a strong corporate and leisure traveler base both outbound and inbound. As of earlier this year, the new management team at Oslo has been expressing its eagerness to regain more initiative in Asia.Previous industry reports has been suggesting that Hainan Airlines would be a suitable candidate carrier, this has been confirmed by their application sent to CAAC a week ago which states the following routes:

From April 2018, Beijing – Oslo return, A330/B787, 3 times weekly,

From May 2018, Shenzhen – Oslo return, A330/B787, twice weekly.

Other than Beijing, Shenzhen is an interesting route in China to launch inter-continental flights with, and this also leads to the uniqueness of Hainan Airlines.

Hainan Airlines is not traditionally a national carrier of China, its hub airports are on the island of Hainan. As of today, it officially call Beijing its base airport which they have been launching numerous long haul fights to compete for market share with the big 3 – Air China, China Eastern and China Southern. In many ways, China has a special rule of only allowing one domestic carrier to operate one city pair of international long haul flights, this means that Hainan can not operate traditional tier one city pair for example Beijing – Los Angeles or Shanghai – Amsterdam, instead, many never-before-heard routes has been launched like Changsha – Los Angeles, Beijing – Prague or Shanghai – Seattle. Its city pair would choose to operate from one tier one airport like New York or Beijing to a second tier airport like Changsha or Prague.

Shenzhen Airport Terminal

For the situation with Shenzhen, it’s interestingly more strategic for Hainan to do so. Shenzhen, the city itself like many other Chinese mega cites, it’s unheard of by many people. Utilised on its unique approximation to Hong Kong, it has now gained the title of the Silicon Valley of China, and the city’s dozen millions population all comes from the rural area 20 years ago. It today has the 6th biggest commercial aviation market in China, and its long haul network hasn’t been officially authorised by officials until a few years back, thus the current hub carrier of Shenzhen – Shenzhen Airlines – A star alliance member(Subsidiary of Air China) is facing the situation with no wide body planes to fly in the short term, so airlines like Hainan is gaming on the unique situation to take over as many routes as possible, even means that they are serving it with relatively low frequencies. So rather than Shanghai or Guangzhou, the city pair of Shenzhen – Oslo wouldn’t seems to be so strange after all.

Operating unconventional routes is not the only special characteristic feature of Hainan. It’s holding company – HNA group has also been doing uncommon market practices with its high-profile mergers and acquisitions. As of today, the HNA group owns major hotel chains like Carlson Hotels groups, it has 25% stockholding in Hilton hotel groups and owns 100% of Swissport and Gate Gourmet and many more.

For many of us frequent travellers, Hainan airlines currently has their own FFP(frequent flyer programmes) called fortune wings club, although they don’t belong to any airline alliances, their partnership with Alaska Airlines can be a highly valuable option as you can register miles through Alaska’s MVP program which allows amazing redemption opportunities to first class products on airlines like Emirates and Cathay Pacific.

First Step Forward

China has enormous opportunities in the future for any airline who want to adapt and grow, and for the Norwegian commercial aviation market to sufficiently nurture and expand not only for its carriers but also for one of the most advanced aviation markets in the world to continue to integrate, Hainan Airlines route application is just the beginning of a new chapter, with hope that the CAAC will grant their permission to start fly those routes shortly. I just want to say that first step is always the hardest, one step forward but fingers crossed not two steps back.

Norwegian Air Fleet


I would like to hear your thoughts on the situation and the possible players you want to see in the field. Leave a comment below or maybe share it with your friends on social media.

Stay tuned.

 

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