It has been a very newsy week for the Worst Airline Ever. ITA, the successor to our beloved Alitalia, has made two big moves. First, it’s bringing back the Alitalia name, and second, it may have finally snagged an investment from Lufthansa Group.
Let’s start with the Italian part of this news. Corriere Della Sera reported last week that ITA President Alfredo Altavilla said the Alitalia name will be brought back, but it won’t replace the ITA name. Instead, it will be a separate brand… because that’s exactly what ITA needs.
Financially, the airline seems to be doing just great. And by that, I mean terrible. In the 2.5 months from when it started through end of 2021, the airline lost 170 million euros on revenue of 86 million euros. That, for those counting at home, is a -197 percent operating margin. ITA bought the Alitalia brand last year for 90 million euros, but that would have happened before the airline started operating and shouldn’t, I assume, be included in this massive loss. (Even if it is, that’s still over a -90 percent margin, and really, does it matter at that point?)
The Return of Alitalia
When ITA bought the Alitalia brand, it said it wouldn’t use it at the new airline. Now, Alfredo says they were always going to use it at the airline, but it won’t be for the whole airline. Here’s where things get hilarious. According to the article, Alfredo says there is a “clear mission” for the Alitalia brand, and he noted that this is similar to other airlines having sub brands, like Lufthansa and Eurowings or KLM and Transavia.
But here’s the thing about those other airlines… those are desperate attempts, especially in the case of Lufthansa, to do an end run around legacy costs in order to try to compete as a lower-cost operator. ITA IS A BRAND NEW AIRLINE. It shouldn’t have any of those legacy issues, so a second brand is just adding complexity without getting benefits, regardless of how it’s used. This is a terrible idea. Pick one or the other.
All that being said, I am thrilled to hear that we’ll have the proper name of the Worst Airline Ever back in the fold again. After all, it’s hard to maintain your title without continuing to do stupid things.
The Return of the Axis
Speaking of stupid things, apparently Lufthansa Group would like to be in the running for Worst Airline Group Ever, because it is now poised to take a stake in ITA. MSC Group — which has cargo and cruise ships — is poised to take a stake as well, giving the two companies majority control.
So far, ITA has just confirmed that it has received a formal “Expression of Interest” and Lufthansa Group and MSC have asked for 90 days exclusivity to work through due diligence. I guess that’s like giving someone a promise ring before getting engaged. Why on Earth would Lufthansa Group want to do this? Well, it’s obviously related to the group’s long-standing obsession with Italy.
This year, Lufthansa Group airlines will fly 111 routes into Italy from 14 different European gateways to 20 different Italian airports. Lufthansa has long held an Italian airline, Air Dolomiti, as part of the group. Air Dolomiti used to be the Lufthansa specialist to connect the Munich hub into the business-minded northern parts of Italy. Now, however, it’s just a lower-cost regional operator that primarily flies from Lufthansa’s Munich hub all around Europe.
Lufthansa Group has always been interested in getting the old “Axis Powers” band back together. It already has a joint venture with ANA in Japan, and it had started Lufthansa Italia as an Italian-focused operation more than a decade ago. But as always seems to be the case, the Italians couldn’t keep it together, and Lufthansa Italia died a merciful death. Lufthansa has sniffed around Alitalia ever since then, but it hasn’t gotten this far until now.
Clearly Lufthansa thinks Italy is an important piece missing from the puzzle. And to be fair, Italy would add a nice toehold into the heavy leisure Mediterranean market, balancing out its other subsidiaries. There’s just one problem. This is ITA/Alitalia we’re talking about.
Lufthansa itself would have a minority stake, but it would bid with MSC Group to keep control… yet it still wants the Italian government to have a minority stake. I have very little faith that German efficiency would be able to turn around this mess. After all, ITA and its predecessors were already tightly tied with Air France/KLM, and they had the joint venture with them and Delta over the Atlantic. It’s not like there’s some huge benefit to joining the larger group that hasn’t already been realized… or attempted to be realized.
Lufthansa likes to get its claws into wayward airlines so it can expand its scope, but I don’t think it’s run into anything as messy as ITA/Alitalia. And that means we’re going to have some great fireworks if this goes through as Lufthansa tries to struggle through a fix. I can’t wait.
29 comments on “Alitalia is Back, and It May Be Taking a German Lover”
Cranky – Alitalia has been getting your criticism since – well – forever (and Lufthansa Group has gotten its fair share as well).
Have you ever gotten backlash from either one? Or do they not care about/know you?
Jonas – I have only heard from Alitalia once. It was shortly after Etihad took over and they seemed keen on getting me out there to try to experience the airline. Of course, the experience has never been my issue anyway, but we had a brief conversation about it and then that was it. Pretty sure they were all swept out soon after, so it fell apart. As for Lufthansa, I get press releases from them sent regularly, but on the occasion I’ve bothered to send requests for comment or information, they have not responded back. So, I couldn’t tell you what they think, if they care at all.
Well, when it comes to adding yet another airline that nobody needs – leave it to LH Group. Eurowings isn’t enough? Let’s start a new leisure focused airline and name it Eurowings *Discover*! Oh, and it will have nothing to do with Eurowings, because that wouldn’t be confusing at all. Next, let’s get in bed with ITA because they in Italy (we love Italy) and now they’re talking about using the Alitalia name for some piece of the airline but not all of it. That’s so hot!
Yeah, that’s Lufthansa. The things they do make no sense sometimes.
“All that being said, I am thrilled to hear that we’ll have the proper name of the Worst Airline Ever back in the fold again. After all, it’s hard to maintain your title without continuing to do stupid things.”
Cranky,
Did you really believe that the Alitalia name was really dead? I mean they had the son of, the ghost of, the first cousin of etc. (Mel Brooks to Gene Wilder on the making of “Young Frankenstein”)
In all seriousness, there was no way they were going to allow that name to die. I think there are a few predictions made here on this matter if I recall.
– why can’t LH start running more flights into Italy using one of its myriad carriers? jumping into bed with this latest doesn’t seem to add any value beyond what they could also do?
– why is Italy so obsessed with having a flag carrier? seems like plenty of airlines already have service into and within Italy and most seem eager to add more. even if alTAlia disappeared tomorrow, it would probably only take 6 months to get most of the service replicated by other carriers.
do they really think the British, French, Dutch, Germans, Swiss, Finns, Spanish, Irish, Portuguese and Austrians run around every day saying, thank God for British Airways, Air France, KLM, Lufthansa, Swissair, Finnair, Iberia, Aer Lingus, TAP and Austrian airlines? (insert head exploding and forehead smacking emojis here)
I think to some extent it is a matter of self-perceived national image. Without ITA/Alitalia/whatever, Italy would be the only G7 country without an airline showing the flag to (at least part of) the rest of the world, and even behind much smaller countries. The old quote from Frank Zappa about not being a real country unless you have a beer and an airline still has some truth to it, at least in how larger countries see themselves.
I wish they would have to publish the total amount spent over the years on this boondoggle and the annual amount per taxpayer.
I’d bet Ryanair and Lufthansa would start to look positively fabulous to most Italians in that light!
Major props to a fellow Zappatista!
Bill – I think the real problem here is that ITA/Alitalia is going to live one way or the other, because the Italian government wants it to live. So, if Lufthansa comes in, then it will have to compete with this zombie airline that loses money. It’s hard enough trying to compete with the low cost carriers. The real value is in trying to serve long-haul from Italy at this point.
ITA is AZ, only smaller, but the ITA name doesn’t work (neither does that weird, expensive, and designed on the cheap livery now flying on 2 Airbus narrow bodies). ITA is AZ, but 1/3 of the size, with the same cranky, greedy, grubby staff, a streamlined but still very much in place network that doesn’t work. LH has been circling the wagons on this for years. It tried LH Italia, which failed. Whatever happens, if ITA/AZ ends up in Star, which likely will given these developments, it is a gut punch to DL which has wanted to preserve its tie up with AZ but not in a financial way.
I, for my part, am gleefully waiting for the time, about a year or 2 from now, when it really goes to crap and the finger pointing starts. Now that’s going to be fun to watch! Mind you, it’s been fun to watch already. The level of ineptitude at ITA is absolutely mind blowing. Their “business plan” is quite the read. And of course, watching Carsten Spohr flapping about is pretty fun too, as he’s far less intelligent than he thinks he is. I bet Ed Bastian and Ben Smith are dancing on their desks right now to be finally rid of that basket case!
To be fair, Italy IS a valuable market where there is money to be made. To Italy, just not from Italy. Between the airport network (the Milan split airport situation makes it basically impossible to run a hub operation there, where the money is, Rome is just too low yielding, and the rest is either not big enough or not wealthy enough), the very high LCC/ULCC penetration, and the hyper-seasonality make one hell of a ride.
Italy is too large a market to ignore, but profit is somewhat elusive. Domestic service is largely overtaken by the high speed train network, except of course to/from the islands. Combined with the messy set up that MXP/LIN/FCO are, make profitability and efficiency hard to clear.
Just a far-out thought related to shoeguy’s comment above. Maybe the Ferrovie dello Stato, the state-owned railroad, can merge with ITA/Alitalia. Maybe that’s a bit extreme, but it seems it can’t be a whole lot worse – or could it? I don’t know. And this comment probably reveals my ignorance.
Tried… and failed… per wikipedia: After multiple failed negotiations with Delta Air Lines, EasyJet, Italian railway company Ferrovie dello Stato Italiane, and China Eastern Airlines, the Italian government took ownership of the airline in March 2020.
https://en.wikipedia.org/wiki/ITA_Airways
CLT Flyer,
Thanks to you, I’m now more informed.
The FS tie up with AZ was on the table a while back (along with the Italian highway system) and it didn’t materialize. Italian trains are awesome. What wrecks Italy’s transportation businesses are its unions.
I wouldn’t worry about it until they go after LOT Polish.
I’m bummed, I forgot them. Brussels air too.
But I wonder if citizens of countries in which the “national” airline is owned by the Germans (Swiss, Austrian, Brussels) or the English (Iberia, Aer Lingus) really feel the same heart warming national pride? ;-)
It says volumes that Delta, which has invested billions in other airlines and re-upped on some airlines even when they went through bankruptcy, isn’t interested in putting a dime into Alitalia/ITA. And Delta chose to remove AZ from the transatlantic JV when it added Virgin Atlantic to the same JV with Air France and KLM, making it the largest JV across the Atlantic.
Cranky Gazelle is right above. ITA serves no commercial value to the big 3 alliances and it is highly doubtful that ITA can be added to the UA-LH joint venture before they lose so much money and dilute fares so much that UA wouldn’t want them in the JV. DOT data shows they had lower average fares than the industry – and DL – in the US-Italy market pre-covid.
LH is interested in ITA in order to dominate the Italian market and keep carriers like Ryanair from growing to LH group markets and is willing to spend billions and probably still fail.
AZ was never more than a junior partner in SkyTeam and to DL and that itself was a major point of contention within AZ, but no one really wanted (and rightly so) to take AZ seriously. Delta, though, was seriously considering an upwards of $150 million investment in Alitalia a year or more ago. The fact that Delta even considered it is mind-boggling.
A German lover? How about adding a British cook?
Don’t forget to install an Italian manager. Oh, wait…
Question: Will you be awarding one or two Cranky Jack Ass Awards?
Also, in addition to your previous blog post in reference to China limiting access to U.S. carriers (including the Delta midair return), I see the U.S. Goverment has finally responded, denying U.S. access to several Chinese carriers in a similar number of frequencies. Now that this issue has morphed from a medical concern into the political arena, it might be even longer to reestablish normal air travel status between the two countries than previously surmised.
Very true. I just hope we get to keep leasing our pandas! Chinese called them back from San Diego and I think one other US zoo. Boooooooo!
Cranky:
My thought is that there may be a possible long term play here for Lufthansa?
If Lufthansa has a secured creditor position as a major investor and Alitalia/ITA goes bust, would they not get paid first?
Maybe they would want to take the routes that Alitalia holds.
I seem to remember that Lufthansa once was circling around Alitalia’s carcass once before for the Italian routes when Alitalia went all zombie on them and came back from the dead. :)
If you are on the inside, it is much easier to get things than when you are on the outside!
Any thoughts?
Keith – If the plan is to wait for Alitalia to go bankrupt, what’s the benefit? You can’t take routes from a defunct airline. In theory you could get some slots, but the Italian government wants to continue to have a flag carrier, so I imagine it wouldn’t just allow Lufthansa to take those. There’s just no good reason to put yourself in Alitalia if the ultimate goal is to pick at the carcass, because the Italians will never let the carcass die.
Just as long as they don’t change their name to Avatar.
Cranky, from what I understand, you didn’t even know Alitalia a bit. I’ve been one of their customers for 45 years, and I’m about to try ITA. I mostly had always good experiences with Alitalia, perhaps I was just lucky, but Alitalia staff has always been kind and pleasant, helping me out, when there were problems. Of course I don’t say it was the best airline in the world, but it doesn’t deserve your harsh words either. I’ve flown with Alitalia many times, and on base of that I can make a statement and say something about them, perhaps I’m just less judgemental than you. Almost all flights I had with them was on a clean plane, with a comfortable seat, good service, not too expensive, and they were on time.
Franco – I’m afraid you don’t understand what this is about. This has nothing to do with the onboard experience. This is about the business.
And Alitalia from a business standpoint is a complete and total disaster.
I am no frequent flyer, and this is only anecdotal, but I once went FCO to CDG in Nov 2015 on AZ for the first time since 1971, lol. Was looking forward to it. Reservations had been made 3+ months prior. Three of us. Arrived FCO to mountains of trash surrounding every trash can in the airport with safety ropes surrounding each mound. Worker strike. It had been fine on our FCO arrival via Delta just 4 days prior. Went to check in at FCO counter for our AZ flight 3 HOURS before departure, then told they were overbooked. A late morning flight. BTW, there were double or triple the number of staff necessary to handle things working behind the counter. Union jobs? (I am not anti-union). We camped out on the floor directly in front of that counter, about 20 ft away. After 3 hours of stress they said they had room and we boarded at the last possible moment – but they still seated us together in a row right behind 1st class. I had been wondering if they were hoping for a last minute high-fare purchase of our low-fare tickets to make more $$. Does this occasionally happen in AirlineWorld? Bounce low fare folks to a later more empty flight if someone might pay $$$ on short notice?
Upon landing at CDG I had just started to drift off due to lack of sleep (Peroni in a bar on our last night), but I was jarred awake by a hard impact on the runway and being simultaneously pressed into my seat because the engines were floored to max thrust. Back into the air for a go-around. Great weather, unlimited visibility, cold Nov air, daylight hours.
We never got an explanation, and many asked as we were de-boarding. Pilots stayed in cockpit. Like Franco said above, AZ staff everywhere were nice, the aircraft was a but older but clean. But the experience made me slightly cautious of booking on AZ again if there were other reasonable choices, even if paying a slightly higher fare elsewhere.