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.