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Market Analysis

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

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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

Cambodia Aviation Ushers Into An New Era Of Market Competition

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Lanmei Airlines A319

The throughput of the three airports in Cambodia is increasing at a rate of 20% per year, but compared with other countries in the Southeast Asia region, there is still much room for development. In the near future, Cambodia will plan a series of new airports, while airlines are actually a capital-intensive, specialised, high-input, low-return industry. The greatest benefit that this industry can bring to investors is not from the airlines themselves, but from the facilitations and synergies of other industries. Therefore, the investment enthusiasm of private capital for the aviation industry has never been reduced. In Southeast Asia, $20 million for funding guarantee might just be entry-level.


Fleet Overview Of Operating Airlines In Cambodia:


A319-100 A320-200 A321-200 ATR 72-500 Total
Lanmei Airlines 1 4 2
7
JC International Airlines
5

5
Sky Angkor Airlines
3 2
5
Cambodia Angkor Airlines
2 2 3 7
Cambodia Airways 3 2

5
Bassaka Air
2

2

Established in March 2016, Lanmei Airlines is currently the largest player in the Cambodian aviation market and is also expanding rapidly. Since its first flight on September 29, 2017, its operation time has been merely two years.

Recently, Lanmei Airlines participated in a cooperation with Philippine Airlines and put one of the aircrafts into operation in the Philippine market. This layout has brought certain imagination to Lanmei’s future development and has indeed brought some pressure to competitors in the industry.

Lanmei Airlines A320
Lanmei Airlines A320

With a fleet size of seven aircraft, Lanmei Airlines is now firmly in Cambodia’s largest airline.

Lanmei Airlines can be considered as Cambodia’s most market-oriented airline. The head of the company owns important positions in state-owned enterprises and private aviation companies. The decision-making process of Lanmei is short and flat. The company’s general direction is clear, and the grass-roots execution is strong. With the goal of developing the market, Lanmei Airlines looks like a perpetual motion machine. The pace of progress has never stopped, not even a short rest.

In 2019, Lanmei Airlines announced that it would realise full-year profit. Lanmei Airlines also registered South Asia Maintenance Company, Lanmei Foods Company and Lanmei Express (mainly express transportation business, currently opened parcel express business from China to Cambodia, Palau), Lanmei’s layout in the upstream and downstream of the industry chain is extremely clear.


JC International Airlines was registered in June 2014, and its preparatory work began in the second half of 2016, making JC Airlines’ operation start half a year earlier than Lanmei Airlines. After more than two years of precipitation, JC has gradually entered a period of steady development. 

JC International Airlines
JC International Airlines

Earlier this July, although in the face of delays in adding new capacity, seven new routes were opened to maximise revenue during this peak season. The main source of profit for JC Airlines comes from the Phnom Penh – Preah Sihanouk route. 


Before the establishment of Lanmei and JC, the hegemony of the Sino-Cambodian tourism market was actually the now little known Sky Angkor Airlines. Sky Angkor was registered in 2010 and is a well-established local cost carrier, its profitability cannot be underestimated. 

SKY ANGKOR AIRLINES
Sky Angkor Airlines

Sky Angkor had formed a good cooperative relationship with its partners in Europe and Vietnam earlier. By taking advantage of the differences between peak seasons of Cambodia, Europe and Vietnam, Sky Angkor was able to deploy cheaply wet-leased European aircrafts in winter and Spring to the Cambodian market. Thus, Sky Angkor can reach maximum capacity of 9 airplanes in Winter and Spring, and only 2 airplanes were kept during the low season in rest of the year. This business model has greatly enhanced Sky Angkor’s profitability. At the same time, its founder’s Korean background also allowed Sky Angkor to show its pioneering ability in the Korean market that is different from other companies. Before Chinese tourist s occupied Angkor Wat, South Korea was the main source country of tourism for Siem Reap. 

Since the entry of Lanmei and JC, two aggressive market expansion carriers, have intervened in the China-Cambodia market, Sky Angkor’s heyday is gone, and its market share has been nibbled away quite a bit. However, due to its early entry into the Chinese market, it has a first-mover advantage and has a lot of time slot resources for first- and second-tier airports in China. Although the Siem Reap market took a lot of pressure in 2018, its took on “changing Siem Reap to Preah Sihanouk” strategy in 2019, helped them guarded the market once again.


There are also two “Que Sera Sera” operators on the sky in Cambodia: Cambodia Angkor Air and Cambodia Airways, of which both are flag carriers of the country. 

This year is the tenth year of Angkor Air operations. Its most important capital source, Vietnam Airlines, has imposed severe restrictions on the development of Angkor Air due to concerns that the rise of the Cambodian market will affect the construction of the parent company’s hub in Ho Chi Minh city.

Cambodia Angkor Air A321
Cambodia Angkor Air A321

As an airline that is about to be established for ten years, Angkor Air has only two A320 series medium-sized passenger aircrafts. It operates Beijing, Shanghai, Guangzhou, Nanning, Hangzhou, Zhengzhou and other mainland Chinese destinations and Ho Chi Minh.

This year, Angkor Airlines opened two new routes, Phnom Penh – Preah Sihanouk and Phnom Penh – Macau, which can be regarded as a breakthrough in recent years. At the same time, following the footsteps of the majority of Cambodian airlines, changing some mainland China to Cambodia routes from Siem Reap to Preah Sihanouk.

Cambodia Angkor Air ATR-72-500
Cambodia Angkor Air ATR-72-500

The Cambodian government has always criticised the lack of development of Angkor Air’s expansion, but it has no capability to strengthen the airline’s capital base, so the government can only temporarily allow foreign investment to gallop. This also explains why the Cambodian government is relatively laissez-faire on foreign-invested airlines. Perhaps they are looking forward to the emergence of an airline that can truly represent the image of the Kingdom of Cambodia.

Cambodia Airways A320
Cambodia Airways A320

Bassaka Air, established on October 6, 2014, is a Cambodian airline initially backed by Air China. It made its first domestic flight on December 1, 2014, and its international flight first operated on May 1, 2015. The airline is invested by Naga World Golden Circle Group.


2018 was a sad year for the Cambodian civil aviation industry, but it gave a shot to the six airlines that are still flying in the Cambodian sky.

Beginning in October 2018, KC International Airlines, Small Planet Airlines, and Bayon Airlines all stopped flying. For a short while, the Cambodian aviation industry ushered in a comprehensive reshuffle. The nine companies that had been in operation were sharply reduced to five, which greatly released the competitive pressure.

  • KC International Airlines, established on July 2, 2018, has been full of legends since its inception. During the preparation process, at least three sets of management teams have been replaced. After the company first obtained the AOC(Air Operations Certificate), the actual number of days of operation did not exceed 60 days, which is very typical of Cambodia’s airlines in the last era. 
KC International Airlines
KC International Airlines
  • Little Planet’s European parent company is a long-term partner of Sky Angkor and one of the main suppliers of wet-leasing aircraft to airlines in the Indochina Peninsula. In December 2017, Little Planet Airlines officially launched its inaugural flight. It stably operated charter flights from Macau to the ASEAN region, and continued to wet lease aircrafts to Sky Angkor and Vietnam Airlines.
Small Planet Airlines 320
Small Planet Airlines 320
  • Bayon Airlines, established on August 21, 2014, is an airline based in Cambodia’s capital Phnom Penh. The airline was reinvested and established by the Chinese Joy Air.

Cambodia Bayon Airlines
Cambodia Bayon Airlines

Also Worth Noting:

  • In April 2012, Cambodia Airlines was established. Cambodia Airlines is an airline operated by Royal Group in cooperation with Philippine capital PAL Holding;
  • In November 2015, Phonm Penh Air Cargo was established;
  • In February 2017, Air Siem Reap was established;
  • In February 2018, Domrey Angkor Airline was established. The capital was backed by the owner of the Angkor Elephant Travel Agency based Siem Reap.
  • In June 2018, CC International Aviation Airlines was established. Except for the main air transportation business, the company’s application scope covers almost all aircraft maintenance-related business projects;
  • In March 2019, Maritime Airlines and Damei Airline were incorporated. Maritime Airlines is part of the Cambodian Maritime Group. The owner of the group is Lord HENG SITHY, whose industries include real estate development, resort development and mining. Damei Airline has a Chinese background as a replacement, and its public shareholders are from China.

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Market Analysis

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

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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 an 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, namely 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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