Why Alitalia's current business model simply doesn't work

Volotea has, in recent days, been moving forward with its aggressive expansion and service resumptions as air travel slowly begins to recover. What won't recover, however, is the bankrupt Alitalia. Instead, the country has decided to launch a Newco to replace the former which, as we reported on Friday, will be named Alitalia TAI.

An Alitalia Airbus A330 registered EI-EJI. Photo by Andrew Pries | AeroNewsX

Volotea's expansion in the past has consistently been throughout the Mediterranean region, notably in Spain, Italy and France. The carrier's network does not include many major cities in Europe such as Frankfurt, London or Brussels. Nevertheless, the carrier's concentrated network provides necessary links between Mediterranean cities.

Such has been its business model since its beginnings at the start of this decade. In 2017, for example, CAPA identified Volotea as Europe's fastest growing low-cost carrier outside of Russia. The carrier has grown rapidly, and while growth slowed slightly in 2019, it continued its expansion across the Mediterranean and has since established itself as a major competitor to the likes of Ryanair and easyJet.

On 3 July, 2020, Volotea inaugurated its new base in Naples, basing 2 Airbus A319s creating 48 direct job opportunities. Naples has now become the carrier's sixth base in Italy after Venezia, Verona, Genova, Palermo and Cagliari and strengthens Volotea's overall position in the Italian aviation industry.

A Volotea Boeing 717-200. The carrier's 717 fleet is gradually set to be replaced by Airbus A319s. Photo by Jero Vida | AeroNewsX

Volotea doesn't directly compete with Alitalia, however. Instead, it limits Alitalia's expansion possibilities. Volotea's business model focuses on connecting small and medium-sized European cities - meaning Alitalia's prestigious Rome and Milan hubs probably don't have much to worry about when it comes to competition from Volotea.

Italy hasn't been blessed when it comes to aviation. With the sudden demise of Air Italy it became clear that the region wasn't in a stable position in regards to airlines - especially considering the critical situation at Alitalia. The latter has been saved countless times by the Italian government and has struggled to maintain profitability for years. The CEO of Ryanair, Michael O'Leary has been extremely vocal about his discontent towards Alitalia's 'illegal' state bailouts, having joked about the carrier's situation many times.

But it is indeed no secret that Alitalia has been struggling financially and, possibly as a result, reputationally. Italy as a whole is hoping, however, that Alitalia will rise once again with Italy having recently founded the Newco to replace the struggling carrier.

With a fleet of over 100 aircraft, however, the Newco will begin with strong footing. It's clear, nevertheless, that some things must change; whether that be through an updated network (part of which we detailed on Friday) or other changes. It is also clear, unfortunately, that the industry has become a lot more competitive - so much so, that Alitalia's previous business model simply doesn't work.

Ryanair and easyJet and have grown aggressively across Italy over the last decade or so and have forced Alitalia's short and medium haul operations into significant troubles. Many have suggested that Alitalia focus more thoroughly on its long-haul network. As we've seen with the example of Pan Am, such does not work unless there's a well-established feeder network providing connection opportunities for passengers.

Ryanair offers more than 60 services from Rome, from both Fiumicino and Ciampino airports. It offers a similar number from Milan. This has become a severe issue for Alitalia, which operates with significantly higher operating costs.

Italy needs a quality, competitive and global flag carrier to help bring the region's aviation industry to stability. While Ryanair, easyJet and Volotea continue to provide a positive boost to connectivity to, from and within Italy, what they don't have is a truly Italian product. The Newco is hopefully set to redefine Alitalia's image and bring the carrier back from its difficult past into clearer, less turbulent skies.

Written by Dillon Shah

Edited by Vincenzo Claudio Piscopo