Flag carriers' pride is no match for gravity - Financial Times

[marcogiov]

Flag carriers' pride is no match for gravity
By John Gapper - Financial Times
Published: September 30 2004 03:00 | Last updated: September 30 2004 03:00

It is possible that somebody among Alitalia's 21,000 employees genuinely thinks Italy's flag carrier can carry on like this. This person has deluded himself that an airline that is under the thumb of politicians, has been run by three chief executives in the past year and faces rearguard action from unions over its latest survival plan has a future.

There are probably quite a few employed by Swiss International Air Lines who (a little more plausibly) believe there is still a place in Europe for a medium-sized, full service, flag carrying airline. Oil may be around $50 a barrel, European state aid may be under severe scrutiny, traditional carriers may be falling like ninepins in the US, but life can proceed in Zurich much as before.

Then again, cartoon characters who run over the edge of cliffs take time to notice gravity. But gravity is inexorable and so are the forces pulling the industry apart. For airlines without regular business travellers to support a sizeable long-haul network, the choice is stark. Compete with Europe's low-cost operators, or collapse.

That reality is hard to face, as the long-running farce at Alitalia illustrates. The company is riddled with inefficiencies - including staff who commute the 300 miles from Rome to Milan daily for work - and needs a €400m (£272m) state-backed emergency loan to avoid bankruptcy. Yet its unions last week forced Giancarlo Cimoli, its chief executive, to dilute a restructuring that would split its operations in two.

Governments like to preserve flag carriers. Job losses are unpalatable and airlines are regarded as sentimentally as car manufacturers - as if they are part of the national fabric. When Swissair collapsed in 2001, it was resurrected as Swiss by bankers, politicians and business leaders who wanted Zurich to remain a European hub airport serving a broad network of global destinations.

That is wishful thinking. Only a few hubs - London, Paris and Frankfurt - draw enough business travellers from nearby to fill aircraft travelling to a lot of international destinations. Airlines based at second-rank airports such as Brussels and Zurich - can support big networks only by cutting fares enough to persuade travellers to change en route at their hubs.

The numbers almost worked before September 11 2001. But the downturn put paid to Sabena, Belgium's flag carrier, and to Brussels' hopes of being an international hub. Since then, KLM, the Dutch airline, has agreed to a quasi-takeover by Air France. Why should Swiss or Alitalia have a better chance of being business-oriented global airlines?

Their alternative is to focus on the retail market, concentrating on domestic and European leisure travel. But this requires a new approach, dictated by low-cost carriers. Not only must airlines reshape their European networks towards different kinds of destinations - tourist resorts rather than business centres - but they also need to offer much lower fares.

That is not easy, but it is possible. A couple of European airlines have gone some way towards it since 2001. SN Brussels, Sabena's successor, was founded with a much smaller network and has gradually been expanding. Even more striking has been the rebirth of Aer Lingus, Ireland's state-controlled carrier, which was close to collapse in 2001.

Since then, Aer Lingus has cut costs ruthlessly in order to compete as a low-cost carrier alongside Ryanair. It has shed nearly a third of employees and reduced total costs by 30 per cent. Business passengers, who now account for only 4 per cent of seats, have been replaced with leisure travellers by expanding European destinations to tourist spots such as Barcelona, Malaga, Prague and Tenerife.

Aer Lingus had one advantage over Swissair and Alitalia. Under European Union rules, it could not be given state aid so its employees could see there was little alternative but to go along. "Our problems were identical to the ones that they face now. We were a legacy carrier with cost structures and work practices that were no longer relevant," says Willie Walsh, Aer Lingus chief executive.

Having avoided confrontation until now, it is harder for Alitalia and Swiss to summon the will - or gain the backing - for action. Swiss has been through several timid rounds of cost-cutting but still flies to 28 destinations outside Europe. Christoph Franz, its chief executive, is working on a restructuring plan but talks of Swiss remaining a network carrier and Zurich an international hub.

He should beware of ending up like Alitalia, which lost €329m in the first half of this year. Its costs are far too high to compete as a European low-fare carrier and it cannot even decide whether Milan or Rome is its main hub. Ryanair now flies to 16 Italian destinations, while British Airways and Lufthansa undercut Alitalia's prices on long-haul flights from Milan.

Ah, the Alitalia employee may reply, but you do not understand. This is Italy, and the national airline will be rescued, no matter how bad things get. Maybe, but there is the European Commission to grapple with, and even the most long-suffering government eventually tires of propping up a flag carrier. Greece is struggling to get rid of Olympic Airways after years of losses, tax breaks and subsidies.

Similarly, Rudolf Merz, Switzerland's finance minister, talks of Swiss being taken over by Lufthansa. That does not please everybody but it makes sense. A profitable flag carrier is one thing, but which nation wants its colours carried by an operation that is at best (Swiss) an anachronism and at worst (Alitalia) a joke?

[FlyIce]

In Origine postato da marcogiov
Flag carriers' pride is no match for gravity
By John Gapper - Financial Times
Published: September 30 2004 03:00 | Last updated: September 30 2004 03:00

...

Similarly, Rudolf Merz, Switzerland's finance minister, talks of Swiss being taken over by Lufthansa. That does not please everybody but it makes sense. A profitable flag carrier is one thing, but which nation wants its colours carried by an operation that is at best (Swiss) an anachronism and at worst (Alitalia) a joke?

L'ho letto nero su bianco e mi ha fatto un po' inca$$are ...
... qui se la prende solo con Swiss che rinasce da una situazione difficile e con AZ che credo non stia simpatica a chi non è Italiano.
Dovrebbe guardare un po' di più in casa sua e vedere che BA perde pezzi (in tutti i sensi) e che AF e LH possono fare le prepotenti grazie alla concorrenza interna pressocchè nulla e a politiche "predatorie" nelle nazioni circostanti.

L'illustre giornalista (di cui non sappiamo niente, neanche in cosa sia specializzato) si dimentica clamorosamente di Iberia, esempio assai meno brillante di Aerligus ...
... cmq a mio parere AZ ha tariffe assolutamante concorrenziali, sicuramante in Europa.
Provate su un sito di viaggi come eviaggi o expedia e vi renderete conto che dalle città italiane con aeroporti piccoli e medi (non so per Roma e Milano) si colloca sempre BEN al sotto di AF, LH e simili ...
... offrendo un servizio migliore di altre compagnie: IB, Swiss, ecc...

[marcogiov]

L' articolo è probabilmente "interessato" dagli sforzi BA verso stampa e UE. Però come azienda Alitalia è davvero una barzelletta.