Rumors Of Fleet, Job, And Service Cuts Coming To Alitalia

Etihad Airways’ expansion strategy has largely been based around having equity stakes in foreign airlines, rather than growing their own fleet too much. Etihad has invested in airberlin, Air Serbia, Alitalia, Jet Airways, etc.

etihad-airways-partners

While I understand the Jet Airways investment since it gives Etihad more access to the India market, their other investments are a bit more puzzling.

With Etihad in cost cutting mode due to decreasing oil revenue for the UAE, it seems that they’re less willing to throw money at their other airlines as well. For example, Etihad is slowly cutting off airberlin, as they realize there’s no end in sight to the airlines’ losses.

airberlin

It looks like that isn’t Etihad’s only investment that’s performing poorly, however. Etihad also owns a 49% stake in Alitalia, and Etihad isn’t happy, as reported by ch-aviation.com. Under pressure from Etihad, apparently Alitalia is considering laying off thousands of employees, retiring ~20 planes, and offering buy on board food & drinks on shorthaul flights:

Last week Italian newspapers quoted company and trade union officials as saying Etihad Airways, Alitalia’s 49% shareholder, insists the Italian carrier phase out almost twenty A320-200s while cutting about 2,000 jobs in a bid to curb losses, said to stand at EUR500,000 (USD552,000) per day. In addition, Etihad wants Alitalia to implement a ‘buy on board’ model akin to that used by Low-Cost Carriers.

Etihad’s displeasure with Rome’s unwillingness to enforce several contractual clauses became more evident this month when the Abu Dhabi-based carrier’s chairman and CEO James Hogan said he was “disappointed” with Matteo Renzi’s administration because “a number of the condition precedents haven’t been met.”

As a consequence, Etihad, which owns 49% of Alitalia, has moved to withhold additional capital from the carrier which has had knock-on effects in several areas, not least of which is the proposed purchase by Alitalia, of a 49% stake in Air Malta.

alitalia-777

Ouch! Obviously as of now Alitalia’s management is saying that the above changes aren’t yet finalized, though it sure seems like they’re in Alitalia’s future.

I still can’t make any sense of Etihad’s investment strategy. It seems like they’re starting to come to their senses, as they’re starting to cut off these carriers that are losing hundreds of millions of dollars. Then again, I’m not sure what they were expecting in the first place, because it’s not like the airlines were making money before Etihad took them over.

New uniforms, new liveries, and dine on demand in business class can only take an airline so far… 😉

New-Alitalia-Uniforms

About lucky

Ben Schlappig (aka Lucky) is a travel consultant, blogger, and avid points collector. He travels about 400,000 miles a year, primarily using miles and points to fund his first class experiences. He chronicles his adventures, along with industry news, here at One Mile At A Time.

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Comments

  1. In a commercial transaction if conditions precedent have not been met then the transaction does not proceed at all. That doesn’t sound like what has happened here. If Alitalia breach the EY investment contract post completion (ie with conditions subsequent), EY should be entitled to pull their investment and let Alitalia continue to die a slow and painful death.

  2. I know you’re an aviation geek Ben, but ‘what they were expecting in the first class’ is taking it a little too far 😉

  3. Etihad had over 200+ planes on order for delivery in the next 10 years. I they dont plans of their own, r that they are only relying on equity partners or their growth.

  4. Obviously, Etihad’s powers-that-be neglected to recall Swissair’s acquisition of floundering Sabena…and the disastrous consequences that acquisition had for the formerly stellar Swissair.

  5. Maybe customers are staying away from Alitalia to avoid being visually assaulted by those hideous new flight attendant uniforms and the baby poo-colored leather seats in the lounges and planes…

  6. Alitalia is always a bad investment, as many have learned before. But Etihad thought they could turn around bad businesses, so they at least wouldn’t be major cash drains, while redirecting traffic through Abu Dhabi. Alitalia and airberlin are the flip side of the Jet Airways investment. Carry European passengers through Abu Dhabi to India, Pakistan, etc and carry passengers from India (Jet), Australia (Virgin Autralia) etc through to Europe.

    Everyone who touches Alitalia gets burned. And Etihad is no doubt thankful they didn’t get suckered into bailing out South African Airways…

  7. In the case of Airberlin it’s pretty obvious: Etihad was always interested in the slots they couldn’t get on European/German airports on their own, so they got airberlin. You can see that strategy clearly in last years endless discussions with the German ministry for transport and infrastructure around the special permission of their codeshare flights….

  8. I wish Etihad would train the staff of these airlines they buy stakes in. I just flew Alitalia, and the service was so horrible. If they’d make the service better, you could forget about their horrendous uniforms, dirty planes, bad food…actually, maybe there’s no hope.

  9. Hogan has never managed a profitable airline, not sure why he and his band of geniuses thought they could turn around this or any other airline.
    I suppose its fun to play with other peoples money.

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