Is Air Italy In Trouble?

Filed Under: Other Airlines

It’s sort of funny how the airline industry works.

Etihad’s disastrous investment in Alitalia

Several years ago Etihad had aspirations of forming a global network of airlines, made up primarily of them acquiring struggling airlines. Among those airlines was Alitalia, which in 2014 they bought a stake in. After a while the government of Abu Dhabi decided they had enough of throwing money down the drain, and in turn Etihad was forced to radically change their strategy, and cut off Alitalia.

Alitalia 777

You’d think that would be the last time that a Gulf carrier acquired a big stake in an Italian carrier. Unfortunately not, though. Akbar Al Baker was basically like “James Hogan, hold my beer non-alcoholic bubbly.”

Qatar Airways’ investment in Air Italy

Then Qatar Airways decided to invest in Italian airline Meridiana. Qatar acquired a 49% stake in the airline, and they planned to completely transform them. Meridiana was a successful leisure airline operating leisure routes with old, uncomfortable planes. But the business model worked, and unlike Alitalia, they were making money.


Meridiana’s 767 business class

But Qatar Airways was determined to turn Air Italy into Alitalia, essentially, as Al Baker said he wanted Air Italy to be the “national airline” of Italy. The airline planned crazy expansion, including plans to acquire 30 Boeing 787s(!!!).

The airline has expanded with no end in sight, and announced service to Bangkok, Chicago, Delhi, Los Angeles, Miami, Mumbai, New York, San Francisco, and Toronto.

I don’t think they actually put much thought into the expansion, because the airline canceled flights to Chicago before they even launched, and canceled flights to Bangkok, Delhi, and Mumbai, within weeks of launch.


Air Italy A330

Air Italy’s latest challenge?

You can read into this however you’d like, but it sure looks to me like Air Italy may be in even more trouble, especially as it impacts their regional route network.

For one, Air Italy ordered 20 Boeing 737 MAX 8 aircraft, and so far only has a few in their fleet. You’d think they’d be taking delivery of these quickly given that the airline is largely funded by Qatar, but the airline’s latest 737 MAX 8 has just been put into storage at Paine Field, which sure doesn’t seem like a good sign.

We don’t exactly know the reasons for this, though we can assume.

There’s also some bad news for them in Sardinia and Sicily, which used to be where they were strongest. Historically Air Italy has had the government contracts for flights to Sardinia and Sicily, but these have just been granted to Alitalia instead.

This includes routes from Cagliari to Rome, Cagliari to Milan, Olbia to Rome, Olbia to Milan, Alghero to Rome, and Alghero to Milan, which is a big blow to their regional network.

Bottom line

I’m not meaning to suggest that Air Italy is on the verge of going out of business, or anything, though it seems increasingly clear to me that the Qatar Airways “dream” for Air Italy won’t materialize.

Last I heard, the plan was for Air Italy to start getting 787s in May 2019. If that were the case, you’d think some of their summer routes would be scheduled to be operated by 787s, but that’s not the case. Not only would I be surprised if they take delivery of any 787s this summer, but I’d be surprised if they get any period.

The whole way Qatar’s investment in Air Italy was handled is just so disheartening. Meridiana was an airline with a niche market and old planes, and that worked for them. They decided that flying from Palermo and Naples to New York with 767s that have eight abreast seating in economy made the most sense, rather than competing directly with Alitalia.

So to see Qatar Airways come in, completely alter the business model of the airline, and not even do so successfully (at least based on how I see it), is sad. Never mind the fact that Alitalia isn’t going anywhere at this point.

What do you make of the Air Italy situation? Do you think the airline will ever take delivery of 787s?

Comments

  1. If the Italian Government does end up investing (again) and pulling up Alitalia, I wouldn’t be surprised to see Air Italy fail.

  2. I get what they were going for, but there doing it too fast. They cannot capture the new markets as they hoped and while trying to they are now losing their old markets. This is the risk and they unfortunately got the worst of both sides.

    It would have been better for them to take the planes first and then expand as they got them.

  3. The relevant question is *why* the fast rollout and the ensuing pullback?

    Seems Air Italy isn’t a useful tool in ending the UAE/Saudi-led blockade of Qatar, so presumably gets de-emphasized. It’s unclear the toll the blockade has taken on the Qatari economy, but they’ve spent $1.5 billion on PR and lobbying alone since the start of the crisis.

  4. I think the first mistake was from changing it from Meridian to Air Italy. meridian had lots of potential without the large ambitions of Qatar. I think they could have done with getting ONLY a few new 787s and 737s with the investment from Qatar to replace their raging fleet… not 30 and 20!!!Meridian also made it sound like an authentic Italian boutique airline, but like said above, they’ve gone for new high profile markets while leaving the markets they’re good at.

  5. In my experience, the problem comes from work ethics in Italy were laziness and and sub-par service is the norm. Same applies in Spain except maybe in Cataluna

  6. Shocked. Absolutely stunned. Seriously, Italy does not need two airlines. The Italian government will sell Sicily before it allows Alitalia to fail. Qatar is learning that Italian unions and the economics of TATL travel to Italy in the off-season, is well, to put it mildly, challenging.

  7. The populist-nationalist Lega-M5S government is rolling out the red carpet for Alitalia — the flights to Sicily and Sardinia are just one example. Another example is their plan to sell Trenitalia tickets on the same itinerary as Alitalia flights, which may make Alitalia flights more competitive for tourists than Air Italy flights. (And also Trenitalia more competitive for tourists than the “private option” Italo high-speed rail operator.)

    If the PD was still in power, I would feel good about Air Italy’s future. But this is a government that will be happy to watch Air Italy collapse, if it means more business for a pseudo-nationalized Alitalia.

  8. Lucky
    It’s a bit more complicated then that.
    There are different issues at play here;
    Foremost the rights to fly it Sardinia and Sicily (to a lesser extent) Are Granted by the Italian government to airlines based on what is called “continuità territoriale” ie “territory continuity”.
    Essentially the government subsidises routes to airlines so that airports on l’essere connectable island points (Olbia, Cagliari, Comiso and Catania) are not left with out of this world prices.
    Prior To meridiana Aga Khan has “Ali Sarda” which was essentially created to bring passengers to Olbia and it’s “Costa smeraldo”.
    Obviously with Alitalia’s current chapter 11 issues the government decided to grant Alitalia for those rights…but for a main issue: Air Italy in Milan is trying to make a hub in Malpensa, whilst territory continuity wants Linate (city airport).
    Air ITALY has the right business model with wanting to hub in Malpensa – but without feeding planes it can’t manage short haul.
    Alitalia itself had 2 flights: JFK once a day (+1 delta flight) and Tokyo Narita 5 times a week –
    With very 2 peanut flights to Rome a day and nothing more.
    So Air Italy can’t make Malpensa work easily and can’t fill flights … whilst Milan needs those planes they might have chosen stupidly to say the least!
    Bangkok has 5 times weekly Thai flights, Delhi 5 times weekly Jet – and both can be easily reached through emirates (4 flights a day) Qatar itself (twice daily) or Etihad (1x).
    The west coast North America routes Are the ones Which will make money; Milan has been craving LA since 29 years.
    SQ itself wanted a 5th freedom flight but couldn’t get it…emirates was trying also for LA but the (fake) agreement with the US now doesn’t allow for or.
    My bet:
    Air ITALY will keep SF and LA, probably introduce 2 other North America routes and in time (2020) try for Narita, Haneda (a winner with the olimpics) or Osaka, Seul and another Asian country.

  9. I live in Milan and the irony is that they’re blasting ads all across the city with destinations that are not even available anymore (BKK/DEL) and flaunting new ones they might not even launch (LAX/SFO)

  10. @Anthony

    Dude that’s not racist, that’s fact. I’m in Sicily at this exact second. Been here for four months. I’m literally amazed these people have a country. Everything is covered in garbage, nobody works and in general resembles Abuja much more than any city/region in Europe.

    Truthfully, this is what collapse looks like. While I’ve here, floods have killed scores and there’s been no ability by the government to respond. Services are nonexistent. When you’re here, you’re on own. I cannot wait to get out of here.

  11. @ Addison — I’m not sure where you are in Sicily, but I’d strongly contest that nobody works (although unemployment is extremely high in Sicily). Keep in mind as well that there are historical and political realities that have resulted in what you’re seeing now. It’s not really a “work ethic” problem in Sicily, but rather a culture of resignation stemming from being a perpetually-conquered people. Centuries of la miseria compounded by war and mass emigration to America in the early half of the 1900’s exacerbated the problems of poverty, and left the island without a young workforce that could have aided economic recovery efforts.

    The note that “there’s been no ability by the government to respond” is absolutely true, has been a hallmark of how Sicily has been administered for thousands of years, and is a large part of why the mafia came to power. I had a landlady grumble to me once that she would have happily continued paying pizzo, if it meant the trash was being collected. Instead she has to send taxes to Rome, and — well, you can see the result.

  12. Just to add a bit of macroeconomics: Italy has officially entered into recession in the last quarter of 2018, i.e. its GDP is shrinking. Italy is the only European country in recession right now.

    Now an economy entering into recession is definitely not the best moment to build up any business, let alone an airline in such a highly competitive environment. Therefore slowing down the expansion makes perfect sense.

  13. Meridiana had terrible old planes but good routes. Jfk-nap was so successful 3 days a week, June to August that they increased it to 7 days a week May to October. The planes were always packed. Not sure why they took that successful route away. Air italy is double the price and now we have a layover in Milan.

  14. Hi.
    Greetings from the beautiful Maldives.
    It seems there are scheduled direct flights from Male’, Maldives to Milan. I am planning a trip to Milan in the fall of 2020. Is it advisable to purchase tickets from Air Italy well in advance to cut down travel costs?
    Thanks.

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