ITA to remake Alitalia, Alaska MAX, Air Asia X: end of the runway?

THIS IS THE LAST POST FOR 2020, SO PLEASE HAVE A WONDERFUL HOLIDAY WEEK AND NEW YEAR.

MASK UP, STAY SAFE, AND STAY AT HOME…

“NEW” ALITALIA BY ITA

Well the long running saga of Alitalia has finally taken a new turn. After repeated bankruptcies over the years, outrageous profligacy, union intransigence, government intervention and interference, the airline went into bankruptcy protection in May 2017. Back in October the Italian Government effectively killed off the airline through executive order, and created the state owned ITA – Italia Transporto Aereo to replace it.

It had been part owned by Etihad who basically walked away from it after its unions just wouldn’t agree to change their working practices. It’s taken well respected national business leaders down, Luca di Montezemollo among them. He’d managed Ferrari, Fiat Group, and oversaw the Schumacher years in Formula One, never mind resuscitating several famous high end brands like the legendary Aqua di Parma Perfumiere. Even he couldn’t get round the problems at Alitalia.

A whole cycle of semi-dubious state loans from the Italian Post Office and Italian Railways, and indirect government support held the airline up, in the meantime everyone from easyJet to Lufthansa was touted – and came close to – buying up some or all of the airline, but it just didn’t pan out. The problem as always, unions who would rather cut their own noses off than adapt.

The saga has led to the creation of ITA – Italia Transporto Aereo.

ITA has created a business plan that between 2021-25 will operate the new Alitalia, planning on buying its brand, and operating 61 routes with 52 aircraft and a around 5,500 employees. The main hub will be Rome Fiumicino, with a secondary hub at Milan Linate, the airport in the centre of the city beloved by business travellers.

There will be two parts of the airline, one service ground and maintenance, with its own cost centre, and then the flight operations side, including arketing, ticket sales and actually operating the aircraft and crews day to day.

Eventually an air cargo division may be established at Milan Malpensa, but I honestly doubt that will ever happen.

The airline plans on retaining the full service model, and will market itself unashamedly in that arena, because there will always be a strong market for it. However the airline understands this time that trying to compete on routes dominated locally by LCC/ULCC airlines is pointless and it won’t even try. It’s principle market is premium European destinations like London, and Paris, and long haul.

The chart below shows the likely long haul destinations the airline will operate.

Below is the planned short/mid haul routes it believes it can compete on from Rome Fiumicino

Below are the routes it plans to operate from Milan Linate. Linate is a fairly restricted airport and has just been refurbished, but its not capable of long haul or even mid haul size aircraft, the largest types seen there generally are A321’s.

In many ways the real surprise is the lack of Milan Malpensa in the network, which is where most of the long haul international business travel arrives. Rome is very much an administrative capital, but Milan is the financial and business capital.

The plan is to expand to 93 routes by 2025.

ITA is negotiating with the old Alitalia for the purchase of its AZ codes, its London slots and the Alitalia brand name, the 055 IATA ticket issuing plate and the frequent flyer business of Programma Millemiglia.

Put together, this has to be understood for what it is. Finally, the old Alitalia and much of its baggage has been put to rest, its debts written off and its employees facing a very different future as a new airline without the weight of the past dragging it down.

The question is will the staff and the unions see it that way, and will they be able to profit from the rebuilding of international and domestic travel as the Covid pandemic slowly recedes into the background in the next 18 months-2 years?

“OUTSTANDING SCI-FI OPENER”

Alaska signs re-jigged MAX-9 order to replace inherited Airbus from Virgin America

Alaska has signed a deal with Boeing to expand its MAX order by 26 aircraft and restructured its existing delivery schedule. In addition it has placed an option for another 52 aircraft it may take up in the future.

68 737-9’s are now confirmed orders with a delivery schedule of 13 aircraft in 2021; 30 in 2022; 13 in 2023; and 12 in 2024. The intention is to remove all of the A320/A319 series from the fleet by the end of 2024.

Alaska also intends on buying the aircraft itself, rather than leasing them (all of the Airbus are leased), largely because the aircraft will retain an asset value that strengthens the company balance sheet.

Air Asia X restructure gets Airbus objection

The Malaysian head-quartered Air Asia X has had twelve of its different creditors object strongly to its restructure, Airbus among them. Airbus is objecting on the basis that the airline has firm orders for US$5 billion in aircraft and that those contracts will be in effect, voided with Airbus loosing out.

Airbus has already built and put in storage 7 A330neo for the airline, with another 71 aircraft on order.

Air Asia X currently owes Airbus US$12 billion including pre-delivery payments for up to 118 aircraft.

Leasing companies are saying that it’s not fair that Airbus, not for the first time when it comes to a notable airline, (it held sway over Skymark in Japan, a deal to sell it to ANA resulted in them buying 3 A380’s), gets to call the shots. The problem for the other creditors is that Airbus is the owner of well over 75% of the airlines debt and it gets to determine the restructuring.

BOCA – one of the major lease holders on AAX aircraft is having a bad year, as it became the biggest shareholder in the near-moribund Norwegian at its own restructure, only to have the airline go into bankruptcy protection and restructure yet again.

AAX has total debts of US$16 billion and is trying to have that reduced to US$200 million so that it can have some chance of surviving. If Airbus votes against, the airline is probably finished, but so then is any hope of Airbus getting paid. On the other hand it might just force other creditors into a deal, or for a wider restructure of Air Asia Group, the airnes parent.