Alitalia

US carriers remain bullish on demand as capacity discipline ensues

Current robust demand trends are creating a sustained confidence among US carriers that the airline business now has a strong foundation to withstand fuel price fluctuations and begin delivering consistent positive results. Although the business overall is still not delivering adequate returns, management teams at US carriers are encouraged the building blocks are in place to manage the industry’s cyclicality. The transformation occurring through capacity discipline and shrewd revenue management is beginning to catch the attention of investors that historically avoided the troubled airline industry.

Recently US Airways president Scott Kirby told a group of investors that during the last three years US airline industry revenues have grown in the double-digit range, which he concluded was a remarkable result in the particularly cyclical airline business. The performance appears to be drawing attention from investors that have eschewed the industry based on past performance, as Mr Kirby remarked during the last few months he has encountered and met with potential investors never drawn to the airline business. He believes their interest is an endorsement in the rationalisation ushered in by consolidation and improved capacity management.

Milan Malpensa is trying to gel low-cost and full service to rebuild its lost glory

Milan Malpensa Airport is betting on low-cost carriers as well as full service carriers to restore its lost glory but it will not be able to rebuild a hub owing to its lack of a local network carrier. LCCs now represent about 50% of total seat capacity at the airport while Alitalia accounts for only 4% of capacity as it has shrunk its Milan network to only seven routes, according to data from Innovata. Including its LCC subsidiary Air One Smart Carrier, Alitalia offers less than 13% of Malpensa’s total seat capacity, which is not sufficient to fulfil a possible hub operator role. Most noteworthy is the decline of Malpensa as a transatlantic gateway.

Malpensa used to be a thriving Alitalia hub with the airline serving over 80 routes from the North Italian airport, including 10 transatlantic routes. But the Italian flag carrier’s bankruptcy at the end 2008 and its restructuring under new private ownership from 2009 changed its fortunes. Alitalia now only operates two transatlantic routes from Malpensa while US carriers have also dropped several routes to Milan in recent years.

Acquisition of Blue Panorama and Wind Jet ensures Alitalia will keep ahead of Ryanair in Italy

Alitalia is poised to bolster its position in its home market through the planned acquisition of smaller Italian carriers Wind Jet and Blue Panorama. If the recently announced deals are completed, Alitalia stands to increase its total market share to about 27%, cementing its position as Italy’s leading passenger carrier.

The acquisitions will also result in increased low-cost competition in Italy as Alitalia expands its presence in the budget sector through the new subsidiary companies.

Alitalia stated there are potential synergies with Blue Panorama and Wind Jet, with the airlines having complementary networks, markets and products. Alitalia will be submitting its plan to Italy’s Antitrust Authority for approval prior to the acquisitions being presented to the governing bodies of the three airlines.

Europe loses four airlines in an unhappy start to 2012

As the economic noose tightens around European airlines, the industry's ranks look set to thin this year. Over late 2011 and the first month of 2012, the industry has witnessed the collapse of four small European carriers as well as the announcement of a merger between Wind Jet and Blue Panorama Airlines by Alitalia. For the time being, it is predominantly smaller, lower capitalised airlines that have failed. The four failed carriers deploy only around 217,000 weekly seats or 0.6% of total European system capacity.

However, the collapses, which follow more than 30 European airline failures over the 2008/09 economic crisis, could in the coming months foreshadow the demise of further carriers or further consolidation, with a number of financially weak carriers operating in the European market. While all but one of the airlines affected so far in 2012 have been based in Continental Europe, there are several weak carriers in Eastern Europe urgently seeking further funding and/or new investors in the near term. Three of the collapsed carriers have been privately owned, but last week's collapse of Spanair shows governments may be willing to let state-supported carriers dither away.

Emirates and Lufthansa growing strongly this summer: World's biggest airlines rankings for August

Lufthansa and Emirates are the fastest growing carriers of the global top ten, increasing their capacity (ASKs) by 12.4% and 8.1% year-on-year, respectively. Delta remains the world's leading carrier by this measure, followed by American Airlines and United Airlines. Combined, United-Continental is roughly 3.3% bigger than Delta by systemwide ASKs.