PHOTO: Alitalia has launched its latest restructuring plan. (Photo via Flickr/BrilYYZ)[/IMAGECAPTION
Struggling Alitalia is promising a return to profitability by 2019 through a series of actions that will reduce costs while also boosting revenue.
If you're feeling a sense of deja vu, don't worry, you're not crazy. Alitalia has recently been in this exact same position. Like 2015, when Etihad bought a 49 percent of the airline and invested $2 billion in a turnaround plan that promised profitability by 2017.
This time around, Italy’s national carrier is calling for a “headcount reduction” of approximately 2,000 permanent and temporary employees from its 12,500 global workforce.
"Headcount reductions are a painful but necessary action that, alongside other cost reductions, will stabilize our financial situation and create long-term sustainability,” said Alitalia CEO Cramer Ball in a press release. “These changes are essential if we are to compete effectively in the extremely tough European aviation market. Together with trade unions, and with the support of the Italian government, we will work respectfully and fairly at ways in which to minimise the impact of the business plan on our people.”
Layoffs are just one part of the "2017-2021 business plan," which was approved by the airline's board of directors earlier this week. In total, Alitalia is promising to reduce costs by €1 billion over the next two years. It has also said it will increase revenue from €2.9 billion to €3.7 billion during the same period.
A major component of the turnaround plan is to hop into the fray and offer "more attractive" airfares while increasing ancillary and on-board services.
“If we can’t compete throughout Italy and Europe against low-cost carriers then we lose air travellers that connect onto intercontinental flights,” said Ball. Put simply, there is absolutely no alternative.”
In the near future, short-haul passengers will find themselves paying for seat selection, checked baggage and priority boarding. The airline has also said it will augment its buy-on-board inventory to include a variety of “made in Italy” food items, snacks and drinks. (It also promised new food service options in 2015) The narrow body planes serving these short-haul routes will also be fitted with additional seats.
Long-term, the airline is planning ten new long-haul routes between 2019 and 2021, during which it also plans to acquire six new long-haul aircraft. It is eyeing a number of new routes to the Americas, which it calls “one of its most underserved markets.” It also plans to grow its presence domestically at Milan Linate, Sicily and Sardinia.
According to Reuters, the airline is losing at least a half million euros daily.
The newish business plan for Alitalia is already meeting with resistance from its union leadership. This is bad news for the airline, which needs union approval to move forward with the plan. Union representatives says the proposed cuts could mean salary reductions of up to 32 percent for flight attendants and up to 28 percent for pilots.
Emiliano Fiorentino, national secretary of the Filt-Cisl union called the plan nothing more than a cost-cutting measure and a not a road towards profitability.
"It's basically a survival plan and as such, it is not acceptable,” said Fiorentino.
In response to the plan, unions have called for a 24-hour strike on April 5.