Etihad’s Alitalia turnaround strategy flops

Less than three years after Etihad Airways saved Alitalia from bankruptcy, the Italian airline is once again on the brink. After spending E400m to buy effective control of Alitalia in 2014, the Abu Dhabi-based carrier launched a much-publicised effort to improve the Italian airline’s service, expand its international routes and make the domestic business leaner. But the drive has done little to push up passenger numbers or beat back fierce competition from low-cost carriers, leaving Alitalia at risk of bankruptcy. It is only weeks away from grounding its fleet and seeking another reboot. On Thursday, Alitalia’s board examined a new business plan — including cost cuts — and a management shake-up for a former state-controlled airline that hasn’t turned a profit in nearly 20 years. The board is set to approve the plan next week. When Etihad bought 49% of Alitalia in 2014, many in Italy hoped the Middle Eastern carrier would provide a fresh start to an airline laid low by years of mismanagement and political interference. With a goal of turning a profit by this year, Alitalia cut unprofitable domestic routes and overhauled its ageing fleet. Hoping that better service would lure travellers away from low-cost carriers, Etihad retrained Alitalia employees, teaching them everything from proper make-up application to foreign languages. But the strategy has flopped. The airline had 23m passengers last year, 270,000 fewer than when Etihad entered in 2014. Meanwhile, Ryanair Holdings, which overtook Alitalia as market leader in Italy in 2014, saw passengers rise 25% to 32.6m over the same period. Alitalia’s load factor was about 76% in 2016, below both Ryanair’s about 95% and the 80% target management had set, according to research institute Bruno Leoni. Piece has further details.<br/>